The dollar was steady against major currencies on Wednesday as investors looked ahead to U.S. employment data due next week that would give clues on the state of the economy and set a direction for the currency. Traders kept an eye on high oil prices and a strong rise in Japanese shares in a day dominated by short-term speculative trading such as hedge funds closing positions or investors settling spot trading for May. At 0600 GMT, the dollar was at 111.65/69 yen , down 0.05 percent from Tuesday's late U.S. levels while the euro was little changed at $1.2107/10 . The euro was unmoved at 135.22/27 yen against 135.27. The dollar had weakened on concern that high oil prices would hurt the U.S. economy and make the Federal Reserve less likely to raise interest rates.
But traders said the market has lost a clear direction amid a lack of news that would confirm a fundamental trend. "After rising to 115 yen on expectations for an interest rate increase, the dollar is falling as it takes a break," said Mitsuru Sahara, a vice president in the forex dealing group at UFJ Bank. "The dollar is likely to trade in a 110-115 yen range until we see U.S. employment figures," he said. Others said since the United States is the world's largest consumer of oil, high crude prices may rein in U.S. consumer spending. Saudi Arabia, the world's top oil exporter, has said it was raising production by 10 percent to 9.1 million barrels per day, without waiting for an OPEC decision to lift official limits. When the Organisation of Petroleum Exporting Countries (OPEC) meets on June 3, OPEC could opt to raise output, which may lower prices.
JAPAN RECOVERY
With economic recovery in Japan becoming clearer, the market could see the yen strengthening again, traders said. "There is market consensus about Japan's economic recovery and the question now is how high the Japanese stock market can rise," said Ryohei Muramatsu, manager in Commerzbank's Asia treasury department. He added that the yen could resume its strengthening trend. The benchmark Nikkei stock average <.N225> ended up 1.73 percent at 11,152.09. U.S. Unemployment rate and non-farm payrolls data for May will be released on June 4. Traders said the market will unlikely be moved by U.S. durable goods orders and new home sales due out later on Wednesday.
The Commerce Department's April durable goods orders are expected to show a drop of 0.2 percent compared with a 5.0 precent rise in March. Sales of U.S. new homes are likely to fall to an annualised rate of 1.2 million units in April from March's record 1.23 million pace, due to higher mortgage rates since mid-March. The market showed little reaction to a rise in Japan's trade surplus, which was up 30.3 percent in April from a year earlier at 1.0791 trillion yen ($9.65 billion), roughly in line with a market consensus forecast of 1.0 trillion yen. "This may have some yen-buying impact in the foreign exchange market but I think it will be limited since the focus is not on trade data," said Soichi Okuda, senior economist at Sumitomo Corp.///