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Dollar ends moderately

higher vs major currencies

NEW YORK: The dollar ended moderately higher versus most major currencies as traders squared positions before the Passover and Easter holidays and demand emerged to buy dollar/yen on dips, traders and analysts said.

"There was some interest from Japanese life insurance companies to buy (dollars) below 106.90 (yen)...," said I.D.E.A. Inc. currency strategist Brian Garvey. "So that provided some support."

The dollar ended at 106.94/01 yen, up slightly from 106.82/89 at the open. It closed at 1.4817/24 marks, up from 1.4779/86.

Garvey also noted the dollar was aided by rumors the Bank of Japan (BOJ) had been checking exchange rates around 106.90 yen and below.

Traders said news that a plane carrying U.S. Commerce Secretary Ronald Brown crashed near the Croatian coast had little impact on the dollar. But there were reports of short-covering shortly after the announcement.

Houck also noted that dollar/mark benefitted earlier in the day when the 1.4770 support level held.

"We saw some people that were short...booking some profits before they take their long weekend," he said.

The Jewish observance of Passover begins Wednesday night. The U.S. fixed-income and foreign exchange markets will be open for an abbreviated session on Good Friday.

Initially, the dollar had opened lower on Wednesday after remarks by BOJ Governor Yasuo Matsushita were seen as a sign that the central bank was becoming more tolerant of higher short-term rates, traders and analysts said.

Matsushita had said it is natural for interest rates in Japan to rise in view of expectations of economic recovery.

Traders said his comments had set off a flood of dollar sales for yen. "Today is the first time in many months I've seen some large hedge funds selling dollars against yen," said Marc Chandler, a senior foreign exchange analyst at Deutsche Morgan Grenfell.

Despite the turmoil caused by Matsushita's remarks, the foreign exchange market may have read too much into his comments, analysts said. The BOJ governor may not have been hinting that a change in monetary policy was imminent.

"If you examine Matsushita's comments last night..., they weren't really that provacative," said Foreign Exchange Analytics Partner David Gilmore. "He was just commenting on long-term rates, which are market determined, rising during a period of expansion."

The BOJ has kept short-term interest rates low in order to help foster Japan's fledgling economic recovery. Thus some analysts doubted the BOJ would be in a hurry to boost rates just as the economy is getting back on track.

"I think there is enough uncertainty about the strength of the recovery in Japan and about the banking system overall that there's really no impetus at the moment to sanction a rise in short-term rates," Gilmore said.

Elsewhere, the dollar ended at 1.1959/66 Swiss francs, up from 1.1914/21 at the open. It rose to Canadian $1.3580/85 from C$1.3560/65.

Sterling fell to $1.5250/60 from $1.5264/71 at the open. The Australian dollar ended at $0.7807/12.

"The Bank of Japan is likely to be very accommodative in its open market operations over the next several days," Chandler said. "That might help relieve some immediate fears Japanese rates are headed up."-Reuter