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Dollar firmer in late Tokyo,

but capped at 108 yen

TOKYO: The dollar was slightly firmer in late Tokyo trade on Tuesday, but failed to pierce its recent high of 108 yen.

Dealers said the dollar was well-supported by bids by Japanese operators and also by the yen's weakness against other currencies, including the Australian dollar, but its topside was capped on heavy sales just below 108 yen.

The dollar also rose briefly in afternoon trade on renewed concerns about Japan's banking sector triggered by a report that the ruling coalition parties were considering suspending budget money earmarked for the wind up of failed mortgage firms, dealers said.

"Some dealers used the report as an excuse to buy the dollar to trigger stop-loss purchases at around 108.10 yen, but met heavy sales just below 108 yen," said a city bank dealer.

Yenselling interest against other currencies such as the Australian dollar and the mark also gave indirect support to the dollar, dealers said.

A dealer at a European bank in Tokyo said large volumes of Australian dollar purchases for yen emerged in afternoon trade.

There had been rumours from early morning trade that Australian dollar buying might emerge in connection with a dual currency samurai bond issue. The Council of Europe set terms on 30 billion yen of dual-currency samurai bonds on Tuesday, with redemption in Australian dollars.

There was also talk last week that a Japanese investment trust firm bought an estimated A$700 million.

A bank dealer in Singapore said mark/yen buying was inhibiting a dollar rise around 1.4850 marks.

As of 0720 GMT, the mark was standing at around 72.87 yen, up from 72.73 yen in late New York trade on Monday.

Some traders had expected the falling U.S. financial markets to put downward pressure on the dollar, but such moves failed to materialise overnight.

Dealers said the market was awaiting a news conference by Bank of Japan Governor Yasuo Matsushita on Wednesday for clues as to the outlook for Japanese interest rates.

But they said that since an easing in the U.S. had become unlikely, the impact of any rises in Japanese rates on the dollar had lessened.

"Even if Japanese rates do rise in the future, U.S. rates would also tend to go up, so they would just move in parallel," said a trust bank dealer in Tokyo.

Speculation over a possible narrowing of the spread between U.S. and Japanese rates hurt the dollar recently, while tensions on the Korean peninsula lent it support, dealers said.

"There are some jitters about the Korean situation so people bought up the dollar," said the Singapore dealer.-Reuter