TOKYO, Dec 19 - The dollar was steady near record lows against the euro on Friday as worries about the U.S. current account deficit prevented it from keeping gains made on strong U.S. economic data. Dealers said the market was watching for more remarks from euro-area officials after European Central Bank (ECB) policy makers indicated on Thursday they were largely at ease with the euro's current strength. "Recent remarks from euro-zone officials were mixed and very confusing," said Mitsuru Yaguchi, senior economist at Mitsubishi Securities. "Some are still fine about the euro's rally on the surface, but I think they have actually started worrying that the economy might be hit if it continues its speedy rise," he said. After an initial rise on a drop in U.S. jobless claims and a surprise surge in regional manufacturing, the greenback fell to $1.2439 against the euro on Thursday, a new all-time low. The dollar was at $1.2419/22 per euro at 0610 GMT.
Bearishness about the U.S. economy, thus the dollar, has benefitted the euro, but the single currency also took heart from German data that showed business confidence rising for the eighth straight month in December. "What's notable is that the euro-zone economy has been recovering despite the euro's rise for the past two years," said Junya Tanase, a forex strategist at JP Morgan Chase in Tokyo. Against the yen, the dollar was helped by persistent speculation that the Japanese authorities could start selling their currency to stop its upward momentum, which is seen harming Japanese manufacturers. Toyota Motor Corp <7203.T> President Fujio Cho said on Friday that the current level of 107 yen to the dollar was a little too strong considering Japan's economic fundamentals. The dollar was traded at 107.63/68 yen , barely changed from the late New York level. Sterling was at $1.7695/00 , continuing its impressive run after hitting an 11-year high against the dollar in New York.
BEARISH OUTLOOK
Traders said the dollar's bearish trend would continue, and despite limited activity in the market, many were confident that a euro rise past $1.25 before the end of the year was a real possibility. Against the yen, many analysts see the possibility of the dollar falling to 100 yen or below. "If pressure for Asian countries to adjust their currencies emerges again at the next Group of Seven meeting early next year, the dollar/yen rate will have no choice but to fall," said Masamichi Koike, head of forex spot trading at Sumitomo Mitsui Banking Co. Others expect foreign investors to keep showing interest in Japanese stocks, and this will weigh on the dollar against the yen. "My impression is that overseas investors are much more confident about the Japanese recovery story than many Japanese think," said Yoshiharu Yanagisawa, vice president of forex at State Street Bank in Tokyo. The Japanese government forecast on Friday that economic growth would slow slightly in real terms in the fiscal year starting next April but would pick up on a nominal basis as the nation's chronic price deflation abates. Japan's gross domestic product would likely grow 1.8 percent in real terms, after accounting for price falls, compared with a projected 2.0 percent for this year, the government said in its annual growth outlook.///