The yen fell against the dollar on Friday, erasing gains made after a survey showing strong Japanese business sentiment the previous day, as investors took their cue from falling Tokyo share prices. Against other currencies, the dollar stayed in well-worn ranges as traders looked to U.S. payroll data for clues on how "measured" the Federal Reserve will be about future credit tightenings after it raised rates on Wednesday. "Amid generally directionless trading it was the stock indices that proved the largest mover (for the dollar/yen)," said Naomi Fink, a senior currency analyst at BNP Paribas. "With the Nikkei now down almost 1 Ѕ percent, that sort of defeated expectations for the index to rally above the 12,000 point again."
The Japanese currency fell as low as 109.35 yen per dollar, down a full yen from the day's high. By 0252 GMT, it was at 109.00 yen versus around 108.40 yen in late U.S. trade. The yen was back around levels it was at before a strong reading in the Bank of Japan's "tankan" survey pushed the currency higher on Thursday in Tokyo. The survey's headline figure for big manufacturers jumped to a stronger-than-expected 22, up from 12 in March and its highest since August 1991. The stock market's benchmark Nikkei average <.N225> ended morning trade down 1.41 percent at 11,727.85 as investors locked in profits after the tankan failed to lift the Nikkei above the psychologically key 12,000 line. Still, traders and analysts see the setback as temporary. "Falls in Japanese share prices will curb the yen's advance," said Shinichi Takasaka, forex manager at Mitsubishi Trust and Banking. "But if you look at the broad picture, the Japanese economy seems to be doing well, as the tankan showed yesterday, and there remain foreign investors who want to buy Japanese shares. So I think the yen could gradually rise," Takasaka said. The euro was around $1.2170 , little changed from around $1.2160 in late U.S. trade. The euro has stayed mostly in a $1.20-$1.22 range during the last three weeks as dealers waited to see more economic data for hints on the outlook for the Fed's policy.
'MEASURED' TIGHTENING
After the Fed pushed up its benchmark interest rate on Wednesday for the first time in four years the market's focus shifted to the pace of its future rate hikes. The Fed reiterated its stance that it would likely be "measured" in future tightenings, though the market was still mulling over the wording. "'Measured' can be interpreted in a variety of different ways, which is probably why they chose the word in the first place. It's a very 'Greenspanish' word," said Fink, referring to Fed chief Alan Greenspan. Financial markets have already priced in several more quarter percent rate rises later in the year. Dollar bears think such views may need to be scaled back if Friday's payroll data is weaker than expected. After three months of solid growth in U.S. jobs, economists expect an increase of 250,000 jobs in June, virtually matching a rise of 248,000 in May. Unemployment figures are regarded by the market as a key gauge for the U.S. central bank as to whether the economy has picked up enough to warrant higher rates. "The Fed is looking for a sustainable way to hike rates, so this is going to depend on, first of all, further jobs being added and then, secondly, wage inflation," said Fink.///