TOKYO - The dollar slipped against the yen on Wednesday on a round of selling by Japanese exporters, but it found support from intervention worries and caution ahead of U.S. non-farm payrolls data due later in the week.
The U.S. currency stayed in sight of a new low hit against the euro on Tuesday following comments from the European Central Bank president that suggested the ECB was unlikely to intervene to stem the euro's rise.
"We are seeing exporter selling after a chunk of offers around 103.30 yen was executed, which in turn triggered sporadic exporter selling at other levels and pushed the dollar lower," said Kaoru Kondo, chief forex analyst at Fisco.
Selling and buying orders were balanced at the morning's commercial fixing, meaning exporters took a more active role compared with recent sessions when importers' demand for the dollar overwhelmed sellers, he said.
As of 10:15 p.m. EST Tuesday, the dollar fetched around 102.80 yen, down from 103.08 in late U.S. trade but off the four-and-a-half year low of 102.15 yen hit on Friday.
The euro bought around $1.3295, up from 1.3282 in late New York trade but below the record high of 1.3336 reached overnight.
ECB President Jean-Claude Trichet repeated on Tuesday that recent moves in the euro were not welcome but also expressed confidence that the United States would act to reduce its huge deficits, which have been hurting dollar sentiment.
Traders said the ECB's monetary policy stance of vigilance against inflationary pressures suggested that Europe would tolerate the euro's current strength, which has helped to ease upward pressure on prices from the rising cost of oil.
For now, the dollar is in narrow ranges and is expected to remain relatively stable until Friday's jobs data, which could provide clues to whether the Federal Reserve will raise interest rates later this month, dealers said.
"The dollar remains in a correction phase from recent heavy selling, after hedge funds closed books for the year and European officials voiced concerns (over the euro's rise)," said Toshiaki Kimura, chief forex manager at Mitsubishi Trust and Banking.
Still, concerns that the U.S. economy may be having trouble financing its yawning current account deficit was seen weighing on the dollar.
"This correction seems to be more to do with time than price ranges, as the dollar's rebound lacks strength," Kimura said.
"The euro has room to strengthen as worries over the dollar prompt a diversification of allocations in reserve currencies into the euro."
SLEW OF DATA
The market showed little reaction to a mixed bag of U.S. economic figures released on Tuesday.
U.S. data due later on Wednesday include personal income and spending in October, the Institute for Supply Management's November manufacturing index and the Federal Reserve's Beige Book, an anecdotal account of business conditions.
Federal Reserve Bank of San Francisco President Janet Yellen also speaks.
But the main blip on traders' radar is Friday's non-farm payrolls data, with the market likely to react aggressively if the reading is weak.
Until then, players are expected to stick to position adjustments.
Wariness about Japanese intervention continued to underpin the dollar against the yen.
"There is caution, particularly from overseas investors, that the Japanese could intervene massively," said Fisco's Kondo.
"So the market is reluctant to aggressively sell the dollar, while wanting to take profits on short-covering when the dollar rebounds."
The Japanese government said late on Tuesday that it did not conduct any yen-selling intervention in November, in line with market expectations.