TOKYO (AFX-ASIA) - The dollar was higher in midmorning trade, continuing the gains made overnight, with US banks covering short positions after the yen failed to push higher in recent days, dealers said.
Expected poor Japanese GDP data due tomorrow, as well as caution over a meeting next week between Finance Minister Masajuro Shiokawa and US Treasury Secretary Paul O'Neill gave further reason for position squaring, they said.
"We failed to extend the yen's gain much beyond 118.50 so short-term US funds started to buy back the dollar," Standard & Poor's MMS managing analyst Hideki Naito said.
"The market is driven by position adjustments ahead of Japanese GDP and US unemployment data, as well as APEC and the meeting between O'Neill and Shiokawa," he added.
Comments overnight by O'Neill, reiterating that the US maintains its strong-dollar policy, were used as a further excuse to buy back the US currency.
"O'Neill's comments are always the same," Naito said, but added that US banks are this morning continuing to buy back the dollar below 121 yen.
Meanwhile, Japanese exporters are offering to sell the dollar, although this is not strong enough to hold the currency in check. "The dollar may return to a relatively firm footing ... (while) the euro, after falling below 0.8850, is seeing some corrective buying." He said little is expected from the meeting between O'Neill and Shiokawa, given the limited opportunity for intervention at current levels.