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Dlr basks in G7 glow: Greenspan words awaited

TOKYO: The dollar was mostly steady against the yen by late afternoon on Tuesday, holding ground gained overnight as overseas speculators looked for the yen to weaken further in the wake of a weekend G7 meeting. The dollar was also able to hold on to much of its overnight gains due to a relative lack of selling by Japanese exporters, dealers said.

In the near term, the focus would be on US Federal Reserve Chairman Alan Greenspan's testimony to the US Senate Budget Committee.

Comments by US Treasury Secretary Lawrence Summers, who said the US savings rate was too low and called for Japan to target faster growth, had only a limited impact on the dollar, dealers said.

The dollar stood at 105.72/82 yen against 105.65 yen in late US trading on Monday.

The euro stood at $1.0080/86 against $1.0075 in late US trading.

Some dealers cited vague rumours that Britain's Vodafone AirTouch Plc was buying euros against sterling in relation to its bid for Germany's Mannesmann, or that the German government had withdrawn its opposition to the deal.

The 124 billion euro hostile bid for Mannesmann, a long-established telecoms and engineering group, by Vodafone has shocked Germany, which is unused to takeover bids from abroad.

Sterling slipped to 61.01 pence against the euro as of 0657 GMT against 60.94 pence in late US trading on Monday.

The yen was weighed down by a drop in Tokyo share prices that followed the Dow's overnight slide after a Federal Reserve official's comment reignited fears of an aggressive tightening.

Atlanta Fed President Jack Guynn, a voting FOMC member, said he did not see many signs that the Fed's three interest rate hikes in 1999 were slowing consumer demand.

The key Nikkei 225 average ended at 18,895.53, down 161.18 points or 0.85 percent from Monday's close.

Dealers said foreign operators were selling yen after finance ministers and central bankers of Group of Seven industrialised nations defied expectations by saying they shared Japan's concerns about the impact of the yen's strength.

Finance Ministry officials reiterated their intent to intervene in the currency market if needed.

Finance Minister Kiichi Miyazawa said Japan would intervene to address disruptive movements in the currency markets, although no such movements had been seen so far on Tuesday.

The G7 has encouraged foreign operators to bet that the yen will weaken in the near term, dealers said.

"There seem to be some increase in yen carry trades, short positions in IMM yen currency futures are on the rise, there has been much interest in buying out-of-the money dollar call options," a trust bank dealer said.

"Some foreign investors seem to be expecting more from the Bank of Japan than just maintaining their current zero interest rate policy," the dealer said.

The G7 communique said: "We welcomed the reaffirmation by the Japanese monetary authorities of their intention to conduct policies appropriately in view of their concern, which we share, about the potential impact of yen appreciation for the Japanese economy and the world economy."-Reuters