LONDON (AFX) - The yen was steady against the dollar, with the rally in Tokyo share prices and profit-taking reversing its earlier losses, dealers said.
"The yen has recovered on the bounce in stocks and on investors taking profits," 4Cast currency strategist Paul Bednarczyk said. WestLB currency strategist Michael Klawitter said comments by Japanese Finance Minister Masajuro Shiokawa about improving tax incentives for holding stocks helped boost the yen.
"Shiokawa also said that he would remain silent if the yen declines and won't step into the currency market," Klawitter said. "With the continued deterioration in the economic data from Japan overnight, we still look for weakness in the yen," he said.
Otherwise, dealers said activity in the currency markets will be subdued ahead of Thursday's European Central Bank meeting and Friday's US labour market report.
"Today's expected rise in US consumer confidence should provide some mild support to the dollar, while the worse-than-expected French unemployment data this morning may weigh slightly on the euro, although both currencies should lack a clear direction," Klawitter said. Dealers said today's Chicago purchasing managers index should give some insight into the US July national purchasing managers index due tomorrow.
In the UK, sterling failed to draw strength from a strong Nationwide house price release this morning and from yesterday's robust consumer credit figures.
Dealers noted expectations that the Bank of England's monetary policy committee will hold rates steady on Thursday despite Friday's poor second quarter GDP figures.