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Dollar holds gains vs yen in Tokyo

TOKYO: The dollar finished the Tokyo session on Friday holding onto solid gains against the yen posted in New York and Europe, but traders said the Japanese currency found some support from a recovery in Tokyo stocks.

The dollar, bolstered by Bank of Japan's (BOJ) yen selling intervention on Tuesday, ran into selling by Japanese exporters after testing resistance around intraday highs reached in the Tokyo morning at 105.61 yen, a six-week high.

But it found an almost equal number of buyers on the downside, confining it to a slim range for most of the session.

Friday's recovery in Tokyo's Nikkei stock average, which was battered over the past two days, also brightened yen sentiment.

Tokyo trade started to wither in the afternoon ahead of US jobs data later on Friday and this weekend's meeting of Group of Seven deputy finance ministers in Tokyo, dealers said. "Japanese exporters sold dollars after the overnight rally. But there was strong buying interest by foreign investors as well as by Japanese investors, keeping the dollar in a tight range," said a senior city bank dealer.

"This looks to suggest that the hassle from the start of the new year seems to have been over," he said.

The yen is widely expected to appreciate further this year on hopes that Japan's economic recovery will gather pace.

But Tuesday's intervention by the BOJ -- estimated to be worth at least $5 billion -- and verbal warnings against excessive yen strength by Japanese officials kept the dollar from hitting 101 yen.

"They (Japanese investors) had sold dollars to hedge as they had expected the dollar to fall in line with a correction in the Dow. But the BOJ's intervention gave them a great relief," said the city bank dealer.

Friday's comments by Japanese Finance Minister Kiichi Miyazawa also underlined his will to prevent a strong yen.

Miyazawa said Japan would intervene if any rapid movements were detected, although traders assumed he did not mean they would sell dollars if it rose quickly.

He also said that the Ministry had intervened to prevent a break of 100 yen to the dollar and that he still believed such a rise in the yen would be undesirable.

Dealers said there may be more intervention ahead of the January 22 meeting in Tokyo of Group of Seven finance ministers and central bankers.

But Japan may not have to intervene to check the yen's rise as some speculators who expected a further fall in the yen were building up yen carry trades.

Hidenao Miyajima, a manager for Nomura Securities Co Ltd's Financial Research Center, said hedge funds have been unwinding euro carry trades and switching to yen carry trades on the view that the yen will weaken in the near term.

"Hedge funds which conducted euro carry trades last year are unwinding such positions because they think the euro has already hit a bottom, and are switching to yen carry trades instead," said Miyajima.

Hedge funds seem to be taking the view that the yen is set to weaken somewhat due to the possibility that G7 leaders may express concerns about the currency's strength, he sad.

The market was looking ahead to US payrolls data due later Friday.

A strong report, particularly on the jobless rate and hourly earnings, will fuel speculation of an aggressive Federal Reserve tightening this year, which could well weigh on US assets, and so the dollar.

Economists surveyed by Reuters expected nonfarm payrolls to have risen 224,000 in December, unemployment to stay at a low 4.1 percent and average hourly earnings to rise 0.3 percent. -Reuters