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Dollar stuck vs yen, but sentiment upbeat

TOKYO: The dollar was stuck in a tight range against the yen in Tokyo trade on Monday after dealers pushed the currency down to secure profits from five-month peaks set in New York on last Friday.

But confidence in the greenback remained solid, as more players become convinced that the US Federal Reserve will be able to ensure a soft landing for the red-hot US economy, dealers said.

In Tokyo, the dollar was quoted at 110.55/58 yen compared with 110.92 yen in late New York on Friday after rising as high as 111.28 yen, its highest since September 7, 1999.

The euro was little changed at $0.9861/66 against $0.9862 in late New York.

"The dollar is being supported mainly by market expectations that the Fed will gradually raise interest rates to soothe the US economy at a moderate pace," said a city bank dealer.

Some analysts said a growing rate gap between the United States and Japan could continue to support the dollar through the end of the Japanese fiscal year in March.Dealers said resistance for the dollar was seen at around 113 yen, with a series of options-related bids awaiting around 111.50 yen, 112 yen and 113 yen.

"The breakthrough above 110 yen after the Moody's announcement last week has helped reverse the tide of dollar/yen," said another city bank dealer.

"This will encourage overseas operators to shift away from yen assets."

Rating agency Moody's Investors Service said on Thursday it had placed on review for possible downgrade the Aa1 rating on yen-denominated domestic securities issued or guaranteed by the Japanese government.

US players were seen as the main dollar buyers, with some squaring positions ahead of the President's Day holiday on Monday.

Comments by US Federal Reserve Board Governor Edward Kelley on Friday saying the Fed was moving interest rates in small increments because the economy was changing radically also supported the dollar.

Some said that earlier in the day, stronger-than-expected economic data played a part in bringing down the dollar to around 110.50 yen.

Japan's all-industries index, which is used to gauge gross domestic product, rose 0.3 percent in December from the month before. That was below the 0.6 percent rise in November but better than the average forecast of a 0.2 percent drop in a Reuters survey of economists.

Participation by Japanese players was relatively subdued on Monday with most exporters having already taken care of their dollar selling needs for the current fiscal year ending on March 31.

But some Japanese investors were looking to buy back dollarnot last indefinitely.-Reuters