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Dollar barely holds above 91 yen in Tokyo

TOKYO: The dollar barely held above 91.00 yen in late Tokyo as aggressive sellers stood back on fear of Bank of Japan (BOJ) intervention to keep sentiment bullish ahead of the biggest U.S. Treasury refunding ever this week.

There was unconfirmed market talk of BOJ buying at around 91.20-30 yen in the morning and again at the same level around midday.

"The BOJ would be pleased if the dollar stays above 91.00 yen before it faces uncertain factors like the U.S. securities auctions and the Bundesbank's policy making meeting later this week," a Japanese bank dealer said.

Exporter selling and profit-taking early this morning undermined a challenge of the 91.80 yen resistance level, and sentiment then became bearish, dealers said.

Buyers on dips before midday when the dollar fell to 91.04 yen were said to be Swiss operators. Those appearing in late afternoon were Japanese trust banks and probably importers, who had not bought the dollar after the recent unexpected rally.

The latest joint intervention by the central banks on August 2 lifted the dollar by more than three yen to 91.25 yen.

Japanese investors' participation in the quarterly refunding, during which a total $42.5 billion of securities will be sold, could increase following last week's announcement of deregulatory steps. But dealers said investors' interest, if any, would centre on shorter-term notes, not in 30-year bonds.

Some dealers said the possibility of intervention may deter the dollar from falling, but for a challenge of the upside, the market may be longing for lower German interest rates.

Market speculation that a German credit easing might be agreed upon after a Bundesbank council meeting on Thursday increased after a senior Bundesbank official made comments suggesting a rate cut might be possible.

Bundesbank Vice President Johann Gaddum hinted Friday that the bank might allow the securities repurchase rate to fall at the next tender in the middle of the week, although he did warn that this would not signal a cut in the discount rate.

A U.S. bank dealer in Singapore said sentiment for dollar/mark was slightly bullish going into the Bundesbank council meeting. He said the next upside target for the dollar/mark was 1.4040 and higher at 1.4145.

Japan's finance ministry said local investors' purchases of foreign bonds rose to a record $20.20 billion in June, from $13.36 billion in May, mainly due to their buying Euroyen issues.-Reuter