| Japan soaking up huge selling to strengthen dollar { March 8 2004 } Original Source Link: (May no longer be active) http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1078381599393&p=1012571727201http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1078381599393&p=1012571727201
Dollar claws higher after weak payrolls data By Neil Dennis Published: March 8 2004 12:12 | Last Updated: March 8 2004 12:12 The dollar clawed back some of last-week's post-payrolls losses against the euro on Monday and continued to strengthen against the yen as Japanese authorities were suspected of intervening in the market.
"Once again there is speculation that the Japanese authorities have been supporting the dollar, soaking up huge selling in the aftermath of the employment report," said Derek Halpenny, head of global currency research at the Bank of Tokyo-Mitsubishi.
He added that the failure of the dollar to depreciate against the yen on Friday after the weak US non-farm payrolls report may have forced initial sellers to reverse their positions.
"On many occasions, senior Japanese officials have stated that this move is an unwinding of speculative short dollar positions - vice-finance minister Masakazu Hayashi repeated this today," said Mr Halpenny.
Mr Hayashi said Japanese authories would continue to act to stem speculative moves in the market, but that it was currently undergoing a reversal of yen-buying/dollar-selling positions. This was backed by recent market positioning data, which showed speculative yen short contracts grew last week to their highest levels since August.
"While the finance ministry has been very successful in weakening the yen as the huge long positions were being squeezed, it should become more difficult to weaken the currency during the weeks ahead," said Steven Saywell, senior currency strategist at Citigroup.
By late morning in Europe, the dollar had risen to Y112.02 from Friday's close of Y111.09, just off Friday's intraday five-month high of Y112.30.
Activities by Japanese officials also helped the dollar claw back some of Friday's losses against the euro.
"Selling the yen against other currencies like the euro, pound and Australian dollar will remain very attractive trades," said Mr Halpenny, saying that it was now likely Japanese authorities thought the Y115 level against the dollar, reached ahead of the Dubai G7 meeting, was appropriate.
By late morning, the euro was back down to $1.2368, from $1.2421 at the close on Friday.
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