The dollar crept up from 10-week lows against the yen on Friday, but its outlook remained bearish following attacks in Iraq and Turkey and less-than-stellar U.S. economic figures. Light bargain-hunting also slightly lifted the U.S. currency against the euro from 2-Ѕ week troughs hit on Thursday, but gains were limited as traders awaited a blitz of crucial events and economic indicators next week. "The U.S. data and the attacks in Iraq have created dollar-selling factors in a market already intent on buying yen," said Shogo Nagaya, forex manager at Nomura Trust and Banking. At 0249 GMT, the dollar was fetching 107.40 yen compared with 107.14 in late U.S. trade, where it skidded to a low of 107.02 yen. Some traders said the market was starting to worry that the Japanese authorities might intervene in the market should the yen strengthen further.
"I don't think they'll step in yet, but further falls (in the dollar) will make players more nervous," said Mitsuo Imaizumi, deputy general manager of the international bond and forex department at Daiwa Securities SMBC. The U.S. currency was at $1.2151 per euro , a touch firmer than in late U.S. trade but still within sight of 2-Ѕ week lows around $1.22. The single currency was trading at 130.50 yen , a tad firmer from late New York levels. Attacks in five Iraqi cities had left about 100 people dead and several hundred injured while bombings in Turkey's two main cities killed four people ahead of a visit by U.S. President George W. Bush to Ankara. U.S. data on Thursday showed orders for durable goods posted an unexpected drop in May, falling 1.6 percent after a 2.6 percent slide in April, marking the first back-to-back decrease since November-December 2002.
BOUNCE SURPRISES
Currency volatility came as a surprise to some analysts who had been expecting a week of quiet, range-bound trading in the lead-up to next week's indicators. The yen has gained more than two percent on the dollar since Monday. "I wasn't expecting the dollar to fall this much (against the yen)," said Daiwa's Imaizumi. "It's very possible that it could fall under 107 yen." Upcoming events include the Federal Reserve's interest rate-setting meeting on Tuesday and Wednesday, the Bank of Japan's tankan survey of business sentiment on Thursday, and U.S. non-farm payrolls data for June on Friday. Still, others argued that while overnight dollar-selling may have been overdone, the yen was gaining on fundamentals, and that dollar/yen movements had little to do with the violence in Iraq. "(Iraq) is not an issue. The yen-buying we're seeing is just a reflection of the growing strength of the economic recovery in Japan," said Yoshi Yanagisawa, vice president of forex at State Street Bank. He added that data released on Friday showing June core consumer prices in Tokyo were down 0.1 percent from a year earlier, slightly worse than market expectations for a flat figure, had limited impact on the market. Japan's top financial diplomat, Zembei Mizoguchi, said late on Thursday that he saw no change in the relative strength of economic fundamentals for the world's three main currencies.////