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Dollar shoots up on

BoJ buying in Tokyo

TOKYO: The dollar shot up to above 94 yen in late Tokyo triggered by apparent buying by the Bank of Japan (BOJ) and US funds, further diminishing the dollar's downside risks after an early downward test failed.

"The intervention helps make traders feel the short-term downward correction is over and the dollar looks against set to test a major trendline of 94.50 yen," a trader said.

Bank traders said the BOJ stepped in to buy dollars at around 93.70-80 yen in afternoon trade, which induced a slew of stop-loss dollar buying and drove it to above 94 yen.

Before the intervention, the dollar had stalled amid Japan's annual "Bon" summer holidays after early falls to around 93.25 yen were halted by talk of buying from Japanese public funds, the BOJ and US funds.

"It was a very short downward correction despite last week's strong rally. Without the BOJ's move today, the dollar might have fallen below 93.00 yen," said a European bank dealer in Tokyo.

"The dollar is unlikely to lose ground quickly unless, extremely negative factors such as a plunges in US stock and bond market and a sell-off by US funds emerge," said Masao Yoshikawa, manager at the Industrial Bank of Japan Ltd.

He said retreating Japanese exproters' selling pressure could also provide the dollar with the leeway to go higher.

Exporters were now engaged in forward dollar sales covering an October-December period, but some had already started covering in a January-March period, dealers said.

All this selling is likely to emerge above 95 yen, said a customer dealer at a Japanese city bank.

The Finance Ministry said Japan's overall customs-cleared trade surplus fell to $9.43 billion in July from $12.25 billion a year ago and the nation's politically sensitive trade surplus with the US also narrowed to $3.87 billion from $5.62 billion a year ago. Economists' forecasts for the overall had ranged from $9.5 billion to $12.2 billion. "I was very, very surprised becuase it was exactly at the lowest forecast," said Makoto Kojima, director of global markets at Barclays Bank.

The Nikkei stock average ended 536.15 points or 3.17 percent higher at 17,452.72, its highest close since 17,472.94 on February 24.

"The dollar/yen has been very supported all day, with rumours that a government-linked Singapore bank has been in the market today around 93.20/30," said a dealer in Singapore.

The dollar rose above 1.4400 marks in late trading, pulled by its surge against the yen, dealers said.

Before the late rally, dollar/mark buying orders were staggered below 1.4300, down to the 1.4240/50 level.

"That's how strong the buying is," said a dealer in Singapore. Some dollar/mark buying interest was even seen at 1.4300/15, said a Barclays Bank dealer.-Reuter