The dollar softened against most major currencies on Monday, taking a breather from its recent rally as investors had second thoughts about whether the United States would raise interest rates in the near term. Traders said the dollar would probably keep drifting ahead of a meeting of Group of Seven finance ministers and central bank governors in Washington on Friday and Saturday. "We are in a bit of a rangy market at the moment," said Derek Kwok, chief foreign exchange dealer at Barclays Bank in Tokyo. "Probably for the next week or two weeks we could well be stuck within a fairly broad 106-110 yen range. For the most part, even far tighter ranges." At 0544 GMT, the dollar was at 107.92/97 yen , a tad up from 107.85 in late New York trade on Friday but well below a one-month peak of 109.28 yen scaled last Thursday.
The euro was trading around $1.2030 , up from $1.1995. Sterling was fetching $1.8028/38 compared with $1.7970. Against the Swiss franc , the dollar was at 1.2896/01 francs , down from 1.2950. A disappointing batch of U.S. data on Friday as well as remarks by Richmond Federal Reserve President Alfred Broaddus that the Fed was still some way from seeing conditions for a rate increase led dealers to take profits on the dollar. "The two main pillars for the dollar's direction -- the U.S. jobs market and monetary policy -- have clearly stepped forward now," said Taisuke Tanaka, chief macro strategist at Credit Suisse First Boston in Tokyo. "But that doesn't mean the dollar will keep rising, as the Fed is likely to be more cautious about hiking rates than earlier expected, especially as the next jobs report is likely to disappoint after surprisingly robust numbers in the previous report." A rise in U.S. interest rates would enhance the allure of U.S. assets for global investors, helping to lift the dollar. The yen's dip against the dollar, and fall to around 129.85 per euro from 129.29, was seen due in part to a cooling of foreign buying of Japanese stocks. Some analysts said foreigners were overweight in Japanese stocks after pouring money into the Tokyo share market in recent weeks on a swell of data pointing to a strengthening of the country's economy. "Rather than continued purchases of Japanese stocks, it seems more likely that foreigners will be looking to take profits on any upturn in the stock market," said Koji Fukaya, chief forex analyst at Bank of Tokyo-Mitsubishi. "This movement will probably support mild dollar strength against the yen." The key Nikkei stock average <.N225> was down 0.77 percent at 11,732.92 in late-afternoon trade.
GREENSPAN AHEAD
The Bank of Japan also seemed some way from boosting interest rates from near zero. BOJ Governor Toshihiko Fukui said on Monday that domestic demand was recovering in Japan but it would take a while for consumer prices to begin rising on a year-on-year basis. The central bank has committed itself to maintaining a super-loose monetary policy until it sees a sustained rise in prices. Fukui was due to speak again at 3 p.m. (0600 GMT), but the market was focused on Federal Reserve Chairman Alan Greenspan's testimony in Congress. He appears on Tuesday and Wednesday, with particular attention on what he will say about the economy on Wednesday. "We don't expect Greenspan to indicate inflation risks or a rate hike in the first half of this year just yet," said Junya Tanase, forex strategist at JP Morgan Chase. "But if he emphasises the Fed's 'patience'... then that could pour cold water on growing speculation about a rate hike as early as August," he said.///