The U.S. dollar edged down against the Japanese yen and other Asian currencies Thursday amid growing apprehension about the ever-widening U.S. current account deficit in data expected later in the day.
Despite the overly bearish mood for the dollar in relatively quiet Asian trading, the greenback stayed solidly above 104 yen as traders bought dollars ahead of the holiday season.
The dollar was trading at 104.28 yen on the Tokyo foreign exchange market late Thursday, down 0.81 yen from late Wednesday. The euro rose to US$1.3414 late Thursday in Tokyo from US$1.3323 late Wednesday.
Other Asian currencies were also up against the dollar on concerns over the U.S. data. The Australian dollar, the South Korean won and the Singapore dollar were all higher.
The Australian currency was quoted at US$0.7650, up from US$0.7569 late Wednesday. In Seoul, the dollar traded late Thursday at 1,056.3 won, dropping from Wednesday's 1,061.4 won. And the dollar stood at 1.6428 Singapore dollars, down from $1.6472 Singapore dollars.
The New Zealand dollar also finished higher on overnight data showing international capital flows to the United States slowed in October, closing at US$0.7179, up from US$0.7103.
"The markets are positioning for this current account data out of the U.S., so if the figures confirm a worsening deficit we may see more U.S. dollar weakness," Westpac Bank senior dealer Mike Burns concurred.Burns said.
According to predictions by analysts surveyed by Dow Jones Newswires, U.S. data due out later in the day will likely show that the nation's third-quarter current account deficit widened to US$170.6 billion from US$166.2 billion in the second quarter -- amounting to a US$77 billion monthly deficit.
Concerns about the deficit have been a major factor behind the plunging dollar this year.
"The market is now driven by psychological factors, so the two sets of data would be enough to raise concern," said Kikuko Takeda, currency analyst at Bank of Tokyo-Mitsubishi, referring to numbers Wednesday that showed foreigners' purchases of U.S. securities are declining, as well as the expected dismal current account data.
Tetsu Aikawa, vice president of foreign exchange customer trading at UFJ Bank in Tokyo, said the dollar's declines may be more pronounced against the euro than against the yen in coming sessions.
European Central Bank President Jean-Claude Trichet's warning Wednesday that the euro's recent rise was "unwelcome" won't be enough to discourage euro's ascent, he said.
"Traders are assuming that the ECB won't directly step into the market to stem its rise," Aikawa said.