12 December 2005, 12:41  Dollar rises against yen in Asian trading

The dollar rose against the yen Monday as the euro moved to a new all-time high against the yen in Asian trading on strong Japanese investor demand for the European currency. The U.S. dollar was trading at 120.81 yen by midafternoon in Tokyo, up 0.14 yen from late Friday in New York. The dollar climbed to a 32-month high of 121.40 yen on Dec. 5. The euro rose to US$1.1830 from US$1.1813 late Friday in New York. In Asian trading Monday, the yen dropped against the greenback as Japanese players sold the currency for various currencies to invest in overseas bond, traders said. The dollar advanced to a session high of 121.07 yen before retreating later on mild profit-taking. The euro's rise to a new high against the yen came amid buying by Japanese trust banks and retail investors, and its hitting 143.00 yen triggered automatic buy orders, leading to a further strengthening. "The euro's rise against the dollar is all yen related. There have been many cross-yen operations in the Tokyo market today," said Tadahiko Nashimoto, director of foreign exchange trading at Barclays Bank in Tokyo. "There's also speculation that U.S. Homeland Investment Act-related flows will finish soon and the euro will recover. That is the market consensus," Nashimoto said. The Homeland Investment Act, which allows U.S. companies to repatriate profits at a lower tax rate until the end of 2005, has put significant pressure on the euro over recent months. Analysts estimate that around 80 percent of overall related flows were from U.S. companies' European operations. Tohru Sasaki, senior currency strategist at JP Morgan in Tokyo, said the euro has room to build on Monday's highs against the yen and could rise as high as 144 yen this week, as Japanese outflows to foreign assets continue. He noted that 10 foreign-denominated bonds will be issued this week alone. But he said that room on the upside versus the dollar looks limited, given the prospect of a likely U.S. rate hike, and he doesn't see the euro rising higher than $1.1900 this week. Traders said many currency players are wary about shifting their positions aggressively ahead of the U.S. Federal Open Market Committee meeting Tuesday.

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