15 January 2004, 10:45  Euro steady on European concerns about rapid rise

TOKYO, Jan 15 - The euro drifted in tight ranges on Thursday after complaints from European officials about its strength against the dollar took some air out of the single currency's bullish momentum. European officials have stepped up their rhetoric this week on the euro, making traders cautious about further pushing up the currency ahead of a meeting of economic policy makers from the Group of Seven (G7) industrial countries next month. Smaller-than-expected U.S. trade deficit figures on Wednesday also helped to support the dollar, traders said. "Things have changed quite a bit this week. The spectre of the G7 coming out with something is keeping people on their toes," said Mitsuo Imaizumi, deputy general manager of international bonds and forex at Daiwa Securities SMBC. But traders pointed out that the dollar's mild turnaround has mainly been due to repositioning and that the currency's downtrend was set to continue for some time. "The dollar's position against the euro at the moment reflects an acknowledgement that the speed of the euro's rise has been too fast. It's just gearing down a bit," said Tohru Sasaki, chief forex strategist at JP Morgan. G7 finance ministers and central bank governors meet in Florida on February 6-7, and the dollar's broad-based weakness is widely expected to be a major topic.
European Central Bank council member Christian Noyer became the latest official to express concerns about the euro's appreciation this week, saying on Wednesday that monetary authorities remained vigilant about the euro's level. At 0220 GMT, the euro was at $1.2660/64 , about two percent below the record high near $1.29 hit earlier in the week and little changed from $1.2645 late on Wednesday in New York.
INTERVENTION JITTERS
The dollar was steady against the yen, hovering around 106.20 yen . Although it dipped slightly under 106 yen on Wednesday, coming within sight of three-year lows around 105.90 set last week, traders said the dollar was underpinned by wariness of yen-selling intervention by Japanese authorities. Dealers said that intervention concerns had made the dollar/yen resilient to typical market-moving elements, such as economic figures. "Figures, as well as comments regarding the weak dollar, seem to be having an effect on almost all currency movements except for the dollar/yen," JP Morgan's Sasaki said. Japan is expected to come under pressure from its peers over its intervention policy when the G7 meets. The Japanese authorities conducted a record 20 trillion yen in intervention last year and are thought to have spent heavily since the start of this year. Finance Minister Sadakazu Tanigaki reiterated on Thursday that the dollar's fall was going too far given U.S. economic strength, and that Japan would take appropriate action, as needed, in the currency market. This view was echoed by Japan's top financial diplomat, Zembei Mizoguchi, who added that foreign exchange markets should be stable and reflect the relative strength of the U.S. economy. Euro/yen stood at 134.40 yen, little changed on the day but down sharply from last Friday's peaks around 137.80. For now, the market was waiting to see if more euro zone officials would join the jawboning foray, with ECB President Jean-Claude Trichet speaking in Naples later in the day. Traders also awaited U.S. retail sales and consumer prices data for December, due out at 1330 GMT.//

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