The dollar extended its month-long rally on Friday, hitting a four-month high versus the yen on hopes for strong U.S. jobs data later in the day and on growing speculation that Japan would continue intervening in the market. The dollar rose as high as 111.43 yen , up from around 111.05 yen late in New York on Thursday, probing fresh four-month peaks for the fourth consecutive day. It is now nearly six percent above 3-1/2-year lows set last month. Dealers suspect the Bank of Japan intervened intermittenly from around 110.50 on Thursday, raising concerns that Japan might be determined to prevent the dollar's recovery from faltering.
"When the dollar was struggling at lower levels, people blindly sold it on the assumption that the Japanese authorities would not continue intervening once the dollar bounced a little. But people aren't so sure anymore," said Junya Tanase, currency strategist at JP Morgan Chase in Tokyo. At 0559 GMT, the dollar was at 111.16/21 yen. The euro was stuck in tight ranges at $1.2213/17 , compared with $1.2198/04 in late U.S. trade, after seesaw trading on Thursday when the European Central Bank left interest rates unchanged, as widely expected.
CRUCIAL JOBS REPORT
Traders said the much-awaited U.S. payroll figures, due at 1330 GMT, would likely be a key factor for whether the dollar continues its bull run and tests next resistance around 112 yen and a three-month peak of $1.2055 versus the euro. "The jobs data will be crucial for the dollar," said Kenji Kobayashi, senior manager of the foreign exchange and treasury division at Bank of Tokyo-Mitsubishi. He said the dollar would likely continue moving upward if non-farm payrolls came in above 200,000 but if the figure turns out lower than 100,000, the U.S. currency could come under "very strong" selling pressure. Economists polled by , on average, forecast a rise of 125,000 in February non-farm payrolls. Given that the stubbornly soft jobs market has been one reason why the Federal Reserve has yet to signal any imminent interest rate increases, a strong reading could push bond yields and other market interest rates significantly higher, supporting the dollar, traders said. Although some players think the dollar could head back down if the jobs data disappoints, dollar bulls think any losses versus the yen will be limited due to wariness over Japanese intervention. "As long as there is this nagging concern about the authorities stepping in again, it looks like even a drop below 111 yen is unlikely for now," said a dealer at a Japanese trust bank.
HOW MUCH MORE INTERVENTION?
Ministry of Finance (MOF) data on Friday showed Japan's external reserves bulging to $776.86 billion at the end of February, a record high for the sixth straight month and up $35.61 billion from the end of January. The figures were in line with the MOF's announcement a week earlier that its market intervention last month had totalled 3.34 trillion yen ($30.07 billion). That brought the total for the first two months of this year above 10 trillion yen -- already half of last year's record 20 trillion yen. Doubts about how far Japan could continue its intervention were highlighted by comments this week by U.S. Federal Reserve Chairman Alan Greenspan. He said an improving Japanese economy meant large-scale intervention would soon no longer meet Japan's monetary policy needs. Japanese Finance Minister Sadakazu Tanigaki defended Japan's stance, telling reporters on Friday that balancing stability and flexibility was important and that he saw no difference between Greenspan's views on Tokyo's policy and Japan's own views. ($1=111.08 yen)//