The dollar held above 114 yen in thin trading Tuesday, January 2, but gains were capped by profit-taking, dealers said.
"It seems today that some profit taking will come in, so the dollar will be capped below the 115 yen level," said a dealer at BNP Paribas.
At 3:50 p.m. (0750 GMT), the dollar changed hands at 114.50 yen, up from 114.33 yen in New York late Friday but down from 114.89-91 yen in Tokyo. Markets were closed Monday for the New Year's Day holiday.
Dollar-yen trading was thin in the absence of fresh leads from Japan where markets are closed for public holidays, dealers said. Markets will reopen Thursday.
Continued concerns over the fragile state of the Japanese economy will likely push the yen lower, dealers said.
Meanwhile, the euro bought 107.80 yen compared with 107.74 yen in New York late Friday and 106.75 yen in Tokyo.
Against the dollar, the euro traded at $0.9420 against $0.9422 in New York late Friday and $0.9290-93 in Tokyo.
The euro was likely to succumb to profit-taking against the dollar and yen at these levels, dealers said.
Research house IDEAglobal.com said Tuesday the dollar was likely to stay below 115.10 yen due to profit-taking in the immediate term.
"However, the backdrop is still one of pessimism about the health of the Japanese economy and the performance of the Nikkei," it said.
The euro is expected to trade on a stronger note this year at the expense of the dollar, DBS Group Holdings said.
"Euroland growth, albeit easing, will remain robust, supported by tax reforms which will spur consumption," the Singapore banking group said.
The US Federal Reserve is likely to lower the key overnight federal funds rate by 50 basis points in the first half of 2001, with a reduction of 25 basis points expected in the first quarter, in order to avoid a sharp slowdown in the economy.
In the near-term however, the euro is expected to trade between $0.9400-9500, a strategist at Dutch bank ABN Amro said.
There remained a limit to further gains for the European unit, he said.
"The market has been long on the euro for quite some time now so there is a limit to the upside," he said.
"There is also lingering concerns over propsects for a productivity miracle in Euroland compared to the US," he added. (AFP)
© Agence France Presse 2000
© 2001 Mena Report (www.menareport.com)
