950811

Dollar ends softer in

late Tokyo after

strong rallies

TOKYO: The dollar lost some ground on the yen and the mark in late Tokyo after hitting a five-month high of 93.80 yen and a two-month high of 1.4320 marks.

The dollar/yen strength, fuelled by buying from a variety of operators, sent the dollar up vs the mark and Swiss franc. "People are currently transfixed by the allure of the dollar," said Ryouhei Muramatsu, forex manager at Commerzbank in Tokyo.

"There has been no major change in fundamentals," Muramatsu said. "But a strong feeling that they have to buy dollars now drove the dollar up sharply," he added.

Dealers said the recent dollar-buying binge was triggered by efforts by the U.S. and Japan to bolster the dollar and last week's move by Japan to promote overseas investment.

They said the dollar-buying spree, despite relatively heavy selling pressure by Japanese exporters today, had succeeded in lifting the dollar above 93 yen and holding it there.

The Bank of Japan (BOJ) has bought dollars recently and entered the market at around 93.35 yen in morning trade.

The BOJ appears to have bought dollars intermittently on Thursday and Friday through a limited number of banks to encourage the rise of the U.S. currency, dealers said.

"We feel a strong intention by Japan's government to push the dollar up, probably to 95 yen in the near term," said a Japanese city bank dealer.

Japan's Finance Minister Masayoshi Takemura told a news conference on Friday that currency rates are now in the process of an "orderly reversal". He said: "I will not comment on specific levels. I still hold the view that it is still in the process of reversal."

Some dealers said the dollar's strength against the mark might also be supported by instability in the Middle East and a growing crisis in Bosnia. Jordan said on Thursday it had given refuge to two sons-in-law of Iraqi President Saddam Hussein, including the mastermind of Iraq's secret military programmes.

"Looking at the dollar/mark today, you would have thought that the Bundesbank had already cut rates, even though it did not (at Thursday's meeting)," said a bank dealer in Singapore.

Muramatsu said the mark's recent falls against the Italian lira accelerated the dollar's rise, but a further rise by the dollar to 1.5 marks might renew inflation concerns in Germany.

Many agreed that the dollar's firm note would last for a while, but some were wary of scooping up dollars further.

"The dollar's recent rally was overdone and distorted by the government's efforts to perk up the dollar," said an assistant manager at a U.S. bank in Tokyo. "I think some downward correction is needed in the near future," he added.

The seven-day Relative Strength Index (RSI) for the dollar/yen stands above 84 percent, a sign that the dollar has being overbought, dealers said.-Reuter