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Dlr, euro helped by view G7 may frown at yen

TOKYO: The dollar found support against the yen in late trade on Wednesday on speculation that the Group of Seven may include a reference to concern over a rising yen in a statement at the end of its meeting this weekend.

The euro's rebound above 107 yen helped push the Japanese currency lower against the greenback, dealers said.

The euro also strengthened against the dollar on speculation that the G7 was more concerned about the European currency and on expectations for a strong reading for the German Ifo index to be released on Thursday.

Elsewhere, the Swiss franc also maintained a firm tone against the dollar and yen after the Swiss National Bank (SNB) slightly raised rates on two-week money instruments on Tuesday, raising speculation of a rise in interest rates.

Traders said the move by the SNB prompted some unwinding of Swiss carry trades, putting pressure on dollar/Swiss and indirectly helping the euro against the dollar.

G7 finance ministers and central bank governors will meet in Tokyo on Saturday. Japanese Finance Minister Kiichi Miyazawa will meet separately with his US, German and French counterparts in the morning prior to the meeting.

The dollar initially gained on speculation over the outcome of the G7 meeting but ran into offers from some Japanese exporters near 105.80 yen, which was also the intraday high.

Kyodo news agency, without citing sources, said on Wednesday that the G7 will include an expression of concern over a strong yen in a joint statement to be issued at the end of the talks.

Most market participants expect the G7 to reiterate what it said after its meeting last September that it shared Japan's concern over a rising yen.

Tomomitsu Oba, a former vice finance minister for international affairs, told Reuters that the G7 was likely to express concern over a strong yen in a statement.

In return, Japan is expected to pledge to continue its stimulative macroeconomic policies, including its zero-interest rate monetary policy.

Bank of Japan Governor Masaru Hayami said on Wednesday that he will tell the G7 that the central bank will maintain its current monetary policy of keeping short-term interest rates at zero percent.

"The dollar's downside seems well-supported on buying interest from both Japanese and US accounts. So the focus is now on whether the dollar can break above 105.80, which would lead to a re-test of 106.40/50 yen again," a dealer at a US bank said.

Dealers said the dollar's upside would gain momentum as some stop-loss buy orders were sighted near 105.80/85 yen.

Elsewhere, the Australian dollar retained a firm tone against the yen on expectations of Japanese investor interest in Australian dollar-denominated debt as they seek higher returns.

The Commonwealth Bank of Australia said on Wednesday it had launched a A$120 million euro medium term note (MTN) issue targeted at Japanese retail investors.

The notes have a maturity date of January 27, 2003, and carry a 6.70 percent per annum coupon with interest paid twice yearly.-Reuters