TOKYO, Dec 30 - The dollar dipped on Tuesday, threatening to hit another record low versus the euro, on a mixture of weak factors, including security concerns, a widening U.S. deficit and low dollar yields. The euro, whose value against the dollar has risen nearly 20 percent this year, was also helped by comments by the German government that it is not worried about euro strength and there is no reason to consider taking measures to try to counter it. "At the root of the dollar's weakness is the fact that global capital is not flowing back to the United States," said Kota Kimura, assistant forex manager at Shinkin Central Bank. As of 0600 GMT, the euro was at $1.2500/03, less than 0.1 percent away from its all-time high of around $1.2510 hit in Europe on Monday. "There is absolutely no change in the trend," said Kenji Kobayashi, senior manager at the foreign exchange and treasury division of Bank of Tokyo-Mitsubishi. Following its recent pattern, the dollar failed to capitalise on Monday on a rally in the U.S. Nasdaq stock index <.IXIC> to its highest level in about two years. The dollar has been susceptible to weak U.S. economic data, making dollar holders nervous ahead of U.S. data later in the day that includes consumer confidence, Midwest manufacturing and existing home sales. "The dollar tends to slip on weak U.S. data so caution is needed," said Junya Tanase, a foreign exchange strategist at J.P. Morgan Chase. The Conference Board index of consumer confidence for December is expected to show a fall to 91.5, while the National Association of Purchasing Management-Chicago business barometer is seen inching down to 62.2. November existing home sales are expected to have slipped a bit to 6.30 million.
INTERVENTION
Against the yen, the dollar's weakness was countered by wariness over possible Japanese intervention. It stayed little changed from late U.S levels around 107.00 yen . Trading was limited on the last trading day of the year in Tokyo. Markets will resume next Monday after New Year holidays. Still, many Japanese exporters are leaving dollar sell orders at around 108 yen so as not to miss any opportunity to sell dollars they earn overseas during the holidays. These orders are likely to limit the dollar's rise, dealers said. Dealers also suspect the Bank of Japan intervened on Monday when the dollar fell to 106.90 yen, and they said further intervention is likely if the dollar falls towards a three-year low of 106.74 yen hit on December 9. Japanese officials worry that a strong yen hurts exports, which are driving an economic recovery. "They will definitely intervene," said Mitsuo Imaizumi, deputy general manager of the international bond and forex department at Daiwa Securities SMBC. The Ministry of Finance will release forex intervention figures at 7 p.m. (1000 GMT) for the four weeks to last Friday. Traders expect the data to show Japan intervened heavily at least twice during that period -- on December 9, when the dollar hit its three-year low, and on December 24, when it again fell below 107 yen. Tanase of J.P. Morgan said he expected the December figure to be between one and two trillion yen ($9.3-18.7 billion). Japan conducted record 17.8 trillion yen of yen-selling intervention in first 11 months of 2003.//