Hong Kong, June 19 (BridgeNews) - Dollar/yen was top heavy in another consolidatory session in Asia Tuesday morning, after the pair rose as high as to a four-week high of 123.52 on Monday. Although a press report that U.S. President George W. Bush is likely to call on Japan to ease monetary policy further provided some boost to the pair in early morning, speculators sold the pair amid the Nikkei's recovery and amid offers piled up mostly above 123.50.
Dollar/yen rose to an intraday high of 123.38 in early morning trade on press reports which said Bush may call on Japan to ease monetary policy when he meets with Japanese Prime Minister Junichiro Koizumi on June 30 in Washington, fueling speculation of Bank of Japan easing. However, the pair pulled back and fell to a low of 123.07 as speculative accounts sold the pair amid Nikkei's gains and on options-related selling due to the unwinding of long gamma positions, dealers said.
BOJ Governor Masaru Hayami said Tuesday additional easing now would not be effective, but said the bank is willing to ease policy further if demand for capital emerges. Hayami also said the central bank is ready to ease if structural reform undermines the nation's economy. The Japanese stock market ended the morning session higher with high-tech issues broadly drawing buying prompted by better-than-expected fourth-quarter earnings from the U.S. software giant Oracle Corp.
The Nikkei 225 Stock Average rose 1.2%, or 149.15 points, to 12,846.94. Japanese Finance Minister Masajuro Shiokawa said Tuesday the recent moves in the foreign exchange market have been "rather large" and his ministry is watching them closely. His comment has cooled the dollar/yen buying momentum to some extent when the pair rose on the back of the press reports on Bush-Koizumi meeting on June 30. Shiokawa also said he wants to make major cuts to Japan's official development assistance budget. However, he said the 10% target reported by the Japanese local media is just an example and an actual figure has not yet been decided.
The market little reacted to comments from other Japanese officials Tuesday morning. Minister of State for Fiscal and Economic Policy Heizo Takenaka said the recent foreign exchange moves have not become a major trend. Takenaka also said there is no divergence between the economic view of the BOJ and the government. This comment followed the central bank's decision on Friday to keep its monetary policy unchanged despite intense political pressure to ease further. Chief Cabinet Secretary Yasuo Fukuda said it is not appropriate for the government to comment on the budget for fiscal 2002-03 (April-March).
Fukuda downplayed Shiokawa's statement over the cut in the budget for ODA, stressing that Shiokawa made the comment in a private meeting. In other foreign exchange trading, euro/dollar stalled mostly near the 0.8590-0.8600 area after falling from a high of 0.8615 in early morning trade. The decline was halted at the place where German bids were rumored to be waiting, according to dealers.
Euro/yen mostly mirrored the moves in dollar/yen, trading in a range of 105.75 and 106.22 as of 1200 JT.