SINGAPORE, Feb 10 - The dollar resumed its fall on Tuesday, hitting an 11-year low against the pound and helping to drag Tokyo shares to a seven-week trough, as dealers decided the Group of Seven nations would not act to boost the U.S. currency. Other Asian stock markets and bonds were steady, while gold gained on the weaker dollar and oil edged higher before an OPEC meeting later in the day. European stocks were expected to open flat to slightly weaker, according to financial bookmakers. The dollar was also within sight of a two-week low against the euro on the perception that the G7 was unlikely to take joint action to back up its weekend warning against "excess volatility" in the currency markets. "The G7 didn't provide any clear direction. In other words, the gradual decline in the dollar is likely to continue," said Kenji Kobayashi, a senior manager at the foreign exchange and treasury division at Bank of Tokyo-Mitsubishi. Although the U.S. currency was mostly steady against the yen, uncertainty over the outlook for the dollar contributed to Japanese stocks falling to their lowest close since Christmas Day.
Camera maker Nikon Corp <7731.T> slumped 10.4 percent after posting an operating loss and cutting its full-year profit forecast. "With the yen's future direction and other uncertain factors lingering in the market, investors are switching to defensive shares from shares that closely follow the economic cycle," said Takahiko Murai, general manager of equities at Nozomi Securities. The Nikkei average <.N225> fell a third of a percent to 10,365.40. MSCI's broadest index of Asia Pacific shares ex-Japan <.MSCIAPJ> rose 0.2 percent to stand a fraction below four-year highs hit last month.
EURO INTERVENTION RISKS?
The pound spiked to an 11-year high above $1.865 while the euro edged up to around $1.275 , near Monday's two-week high. The dollar was also trading at around 105.50 yen from late New York levels around 105.70 . Although euro zone finance ministers said after they met on Monday that they did not discuss intervention in currency markets, some think European policy-makers' patience with their currency's strength may soon run out. "Some people are considering the chance of European intervention," said Kimura of Shinkin Bank. "So they are buying the British pound and the Australian dollar instead." The Australian dollar hit a nine-day high. Other Asian currencies also strengthened against the dollar after dealers interpreted a call for exchange rate flexibility in a G7 communique as a reference to the region. The Singapore dollar held near a four-year high and the Taiwan dollar hit an 18-month peak. The weaker dollar lifted gold, which often rises as the metal becomes cheaper for holders of other currencies. Gold rose almost $2 to $408 an ounce. U.S. crude oil edged up 0.3 percent to $32.93 a barrel amid concerns that the Organisation of Petroleum Exporting Countries may move to rein in production at its meeting in Algiers later in the day. Japanese government bonds inched up while U.S. Treasuries were little changed.
GREENSPAN TO SPEAK
Stock benchmarks rose 0.4 percent in Taiwan <.TWII> and 0.2 percent in South Korea <.KS11>, but fell 0.1 percent in Hong Kong <.HSI> and Singapore <.STI>. Australia <.AXJO> closed flat. With the G7 meeting out of the way, investors' focus was shifting to Federal Reserve Chairman Alan Greenspan's semi-annual testimony on the economy before a House of Representatives panel on Wednesday. He is also scheduled to appear before the Senate Banking Committee on Thursday. "If he talks about raising interest rates, that'll put a brake on the dollar's fall. But with the (presidential election) coming up, I don't think that's very likely," said Tokyo-Mitsubishi's Kobayashi.//