The US dollar remained above 116 yen in Asian trading Monday, january 8, as the Japanese currency continued to be depressed by ongoing concerns about the economy, dealers said.
At 3:30 pm (0730 GMT), the dollar was trading at 116.28 yen in Singapore, down from 116.58 yen in New York but up from 116.28 yen in Tokyo late Friday. Japanese markets are closed Monday for a public holiday and will reopen Tuesday.
Some investors were taking the opportunity to take profits on the dollar before Japanese markets reopen Tuesday, dealers said.
The yen's gains against the dollar are likely to be short-lived, they said.
"The sentiment on the yen is still negative," said Thio Chin Loo, a Singapore-based currency strategist at BNP Paribas.
"What's happened is that people have downgraded Japanese growth forecasts," she said.
"That is still the play in the market...the market is still looking for a softer yen."
The yen is likely to dive further if the gloomy outlook for the Japanese economy persists, dealers said.
"With the reassesment going on about the Japanese economy, the yen could turn softer," said Vasan Shridhavan, a treasury economist at Standard Chartered Bank in Singapore.
"There is a feeling the cyclical upturn we saw (last year) has hit a peak," he said.
Recent Japanese economic indicators were worse than expected, adding to growing fears the Japanese economy could slip back into a recession.
Research house IDEAglobal.com however said the yen's slide could be limited.
"A US slowdown coupled with a likely slowdown in export growth is likely to mean that the US Treasury will be less willing to allow the yen to embark on a weakening trend," it said.
"While modest yen weakness will not be frowned upon by the US Treasury, it remains uncertain how much yen weakness they will be willing to tolerate given the US slowdown and the likely impact on Asian regional currencies."
The euro was quoted at $0.9583 against $0.9578 in New York and $0.9549 in Tokyo late Friday.
It was expected to remain firm amid volatility in US equity markets, dealers said.
US stocks closed sharply lower Friday after surging on Wednesday following the Federal Reserve Board's surprise move to cut key interest rates by half a percentage point to six percent.
"It looks like the US stock market is not going to come out of the woods," said Lee Boon Keng, a market strategist at DBS Group Holdings, adding the US market volatility will benefit the euro.
The European unit traded at 111.40 yen, down from 111.63 yen in New York but up from 111.03 yen in Tokyo. The euro is favored to consolidate its position against the dollar and the yen, dealers said.
"The cyclical fundamentals appear to be favoring funds flowing into Europe," said Shridhavan at Standard Chartered Bank.—(AFP)
© Agence France Presse 2000
© 2001 Mena Report (www.menareport.com)
