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REUTERS
Singapore, Sept 15: The dollar rose against the yen on strong mark/yen buying in Tuesday morning Asian trade, with volumes severely thinned by a Japanese holiday.
But dealers said any rises in the dollar were likely to be short-lived and capped by Japanese offers around 130.30 yen. "The most important thing is that the market is very thin with Tokyo out," said a European bank dealer in Singapore.
"Mark/yen looked pretty biddish overnight and that has stabilised dollar/yen dramatically," he added.
He said the dollar should trade in a 132.25-133.25 yen range, showing more room on the upside in the short-term with mark/yen targetting the 78.75 level.
The dollar was quoted at 132.85/93 yen and 1.6963/73 marks at 0141 GMT against its New York close at 132.35/45 yen and 1.6965/75 marks.
Wall Street's overnight rise and fading expectations that US president Bill Clinton would face impeachment for his involvement in a sex and perjury scandal also kept the dollar underpinned.
In a speech in New York onMonday, Clinton called on finance ministers and central bank chiefs from the Group of Seven nations as well as emerging market countries to meet in Washington within a month to craft long-term solutions to the financial crisis.
But dealers here attached little importance to his words.
"Everybody knows that Clinton is just trying to distract attention from his personal problems. I'd give more importance to what (US Federal Reserve chairman Alan) Greenspan and (Treasury secretary Robert) Rubin say," the dealer said.
But with speculation of an impending US interest rate cut growing into virtual certainty as US growth succumbs to the ripple effects of the Asian crisis and Latin American woes, analysts said the dollar would struggle to make significant headway.
"We might see a short-term technical rebound in the dollar but overall it's still in a downward track, particularly against the mark," said Dilip Shahani, senior economist at HSBC Markets in Hong Kong.
"US interest rates are going to come down,probably by 100 to 150 basis points over the next 12 to 18 months, and the US current account deficit is going to continue to widen," Shahani told Reuters Television.
He said the Fed could ease US rates by 25 basis points as early as its September 29 policy-making meeting, but this had largely been priced in by the market.
"It will help to underline the view that interest rates in G7 countries are coming down and that will help stimulate overall global demand and stop safe-haven capital flows to the US and Germany," Shahani said.
Federal Reserve Bank of Atlanta president Jack Guynn said late on Monday that the central bank's policymakers would study a full range of options at their next meeting and that the risks to the US economy are more balanced now.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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