LONDON, Jan 23 - The euro rose for the fourth straight session against the dollar on Friday, coming within 1-1/2 cents of a recent record high as lack of strong opposition from euro zone policymakers encouraged further buying. European Central Bank chief economist Otmar Issing, speaking in Davos on Thursday, reiterated the bank's worries about sharp movements in the euro, echoing other ECB officials. But ECB policymakers have stopped short of mapping out how they would reduce volatility and curb euro strength, with no strong indication they would use interest rates as an option. Issing and ECB president Jean-Claude Trichet are both due to speak at the World Economic Forum in Davos later on Friday. "The market has realised that in order for policy to become significantly negative for the euro, you need to get all the policymakers to agree the moves have gone too far and the dollar is undervalued. But in this case there is no uniform opposition," said Shahab Jalinoos, senior currency strategist at ABN AMRO.
"You will also need the U.S. to support the view too. But we are long way off from that." By 0900 GMT, the euro rose to $1.2775 , compared with $1.2712 in late New York on Thursday and a Monday low of $1.2331. It hit an all-time high of $1.2898 last week. The yen kept a low profile at 106.05 per dollar on wariness of Japanese intervention, staying just below this month's three-year high near 105.70. "I think 105 yen is the defence line for Japanese authorities now but they are taking a one yen buffer," said Junya Tanase, foreign exchange strategist at JP Morgan Chase.
G7 AND JAPAN
Apart from gauging the ECB's stance on a rising euro, the market was focused on how Group of Seven finance ministers would react to the overall weakening dollar when they meet in Florida on February 6-7. "They won't depart too far from what they said in the last meeting (in September). At most they are likely to say they want a flexible exchange rate but the market should avoid excessive volatility," Jalinoos said. Japanese Finance Minister Sadakazu Tanigaki told a news conference he hoped to give an accurate picture of Japan's fiscal and monetary policies at the G7 meeting. G7 deputy finance ministers are due to meet in Brussels next Monday to work on the agenda for the February meeting. Japan has been vocal in its opposition to any export-damaging yen strength, with the country's top financial diplomat Zembei Mizoguchi repeating on Friday the standard line that monetary authorities were continuing to watch movements in the markets closely. The minutes from the Bank of Japan's December 15-16 meeting showed members of the policy board agreed that moves in the foreign exchange market needed close monitoring, although some felt the impact of the high yen on the economy had so far been limited.//