The dollar was flat on Wednesday, keeping the previous day's sizable gains versus European currencies as traders sought more data to judge if the dollar's two-year decline was over. The dollar was also steady against the yen, a currency recently dominated by wariness over Japan's dollar-buying intervention. The yen thus showed little reaction to a series of Japanese economic indicators, including a downward revision in Japan's October-December growth data. "The dollar/yen's focus remains the authorities' stance on intervention," said Takashi Toyahara, a manager at Nomura Securities.
"Looking at yesterday's movements, it looks like they are out to protect 110 yen." At 0230 GMT, the dollar was around 111.25 yen , little changed from late New York levels. Indeed, it has stayed near that level since late Monday in U.S. trade, except for a blip lower to around 110.20 yen in late U.S. trade on Tuesday. The Bank of Japan (BOJ) was suspected of intervening after that tumble to prevent the dollar from slipping under 110 yen, bringing it back above 111 yen. On Wednesday morning, the yen barely budged after Japan said gross domestic product grew by a real 1.6 percent during the last three months of 2003, down from an initial estimate of 1.7 percent growth. Other data showed the surplus in Japan's current account, the broadest measure of trade in goods and services, soared 135.2 percent in January from a year earlier to 1.0540 trillion yen ($9.46 billion). The February domestic corporate goods price index rose 0.2 percent from the previous month, a welcome development for the government's fight against deflation.
DOLLAR DECLINE
The euro, meanwhile, was at $1.2320 also little changed from its level in late U.S. trade, after falling around 0.7 percent on Tuesday. The British pound, which posted the largest fall among major currencies on Tuesday, was also little changed at $1.8270 after tumbling 1.3 percent. Sterling dived after data showed the U.K. trade deficit soared to a record 5.6 billion pounds in January, triggering a knock-on drop in the euro. "I guess sterling's fall suggests just how much long-position market players have piled up in sterling," said Junya Tanase, strategist at JP Morgan Chase.
With the dollar cutting back on its losses after last week's poor U.S. payroll data, dollar bulls are hoping the currency's two-year decline has come to an end. "I thought the dollar's declining trend was over. I thought I'd be right in thinking that way if the dollar's fall after the payroll data lasted only a few days," said Yoshiharu Yanagisawa, vice president at State Street Bank. "I think the dollar is unlikely to fall much," he said. Still, others think the dollar could come under pressure given the immense U.S. current account deficit. Thus traders were looking to U.S. trade data due at 1330 GMT. Economists polled by said the trade gap was likely steady at $42.05 billion in January compared with a December reading of $42.48 billion.///