TOKYO, Feb 13 - The dollar fell to an 11-year low against sterling as the well-worn "sell the greenback" theme re-emerged in late Asian trade on Friday but fears of Japanese intervention kept it hemmed in a tight range against the yen. For much of the session the dollar moved little against major currencies, with a heightened sensitivity to possible coordinated central bank action having a lot to do with that, but sentiment towards the U.S. currency remained overwhelmingly bearish. "It seems that the dollar is being sold against higher yielding currencies," said Takashi Toyahara, a foreign exchange manager at Nomura Securities in Tokyo, adding that "purchases of sterling was the key driver in the market right now", giving the euro its latest push up.
Sterling reached $1.8971 , its highest level since September 1992, before pulling back slightly to $1.8957, up 0.20 percent from late New York trade. The euro rose to $1.2821 , up 0.15 percent on the day. "Unless U.S. or European officials warn against euro strength, there is a chance that the single currency could test record highs," Toyahara added. The euro hit an all-time high just under $1.29 on January 12. Investors continued to dump the dollar in search of assets in currencies bringing higher yields, such as the Australian dollar. The benchmark interest rate in Australia is 5.25 percent versus 1.0 percent in the United States. Earlier, the Australian dollar hit a seven-year high against the U.S. dollar at around US$0.7921 . With Federal Reserve Chairman Alan Greenspan saying this week he was not overly concerned with the dollar's decline and its potential to spark inflation, interest rates in the United States are not expected to change for the time being.
The dollar moved in a tight range against the yen, hovering near 105.40 yen according to Reuters data. "Heavy options-related selling is expected under 105 yen and I think the authorities know this so they aren't going to let it break that level so easily," said Mitsuru Sahara, vice president of the currency dealing group at UFJ Bank. Japanese Finance Minister Sadakazu Tanigaki said on Friday that Japan's intervention in currency markets was not aimed at keeping the yen at a particular level, but that it would take decisive steps against excessive moves. Investors remain wary of the willingness and ability of Japan's financial authorities to intervene to prop up the dollar. In January alone, they spent a record seven trillion yen ($66.45 billion) on intervention. "There must be some very keen defence of dollar/yen around 105.30," said Jake Moore, senior currency strategist at Barclays Bank in Tokyo.
EXPANDED INTERVENTION?
Earlier, Zembei Mizoguchi, Japan's top financial diplomat, would not comment when asked by reporters if Japan could intervene with European authorities to stop their currencies from rising in value against the dollar. Hiroshi Watanabe, head of the Japanese Ministry of Finance's international division, said on Thursday that the government could not rule out coordinated intervention.
"At the moment there is no coordinated intervention and it seems unlikely that there will be. Japan would love it, it would be very favourable for their policy. That said, people are getting nervous that the ECB could intervene in the months ahead. I personally don't think they will," said Barclays' Moore. UFJ's Sahara said: "There is some caution about pushing the euro to record highs after G7 (Group of Seven) countries warned against excessive volatility, although I don't think European officials will intervene." Ahead of the long President's Day holiday weekend in the United States, investors will get a healthy portion of U.S. economic data. At 1330 GMT, international trade data are expected to show the deficit increased to $40 billion in December from $38.01 billion in November. The February preliminary University of Michigan consumer sentiment survey is due at around 1445 GMT, with economists forecasting a small decline to 103.3 from 103.8 in January.//