30 November 2001, 09:10 Forex - Dollar higher in midmorning Tokyo on short-covering, Enron concerns
TOKYO (AFX-ASIA) - The dollar was higher in midmorning, continuing
overnight short-covering, spurred in part by speculation that Japanese
firms are heavily exposed to Enron Corp, dealers said.
The yen fell against the dollar in New York trade, pressured by
market speculation that Japanese banks and companies could incur heavy
losses from the financial collapse of Enron.
Several Japanese investment trusts have exposure to Enron debt.
However, dealers in Japan said the rumours seem to be
opportunistic, even if true, with the dollar/yen remaining within its
recent technical range.
The market ignored this morning's weak CPI and unemployment
numbers.
Royal Bank of Scotland head of foreign exchange sales Kosuke Hanao
said the rumours related to Enron seem to be simply an excuse to sell
off the yen, noting that the dollar also rose against the euro and
Swiss.
"The main reason for the US dollar short-covering is the stock
recovery. The market is looking at US-asset factors," Hanao said,
noting that worsening Japanese indicators this morning had little
impact.
"The figures are bad but they are already discounted in the
market."
Hanao said that while there is no reason to buy the yen, the dollar
may struggle to push strongly higher beyond the existing range of
around 123-135 yen, given the lack of appetite for foreign exchange
risk by Japanese investors.
"Foreign investors want to buy but they already have huge
positions," with only little room to increase yen-short positions, he
said.
"To pursue the dollar on the upside, Japanese investors have to buy
... but life insurers are on the sidelines as they are generally
shrinking risk assets on their balance sheets," he said.
In addition, the risk of profit-taking in the US stockmarket
towards the year-end may keep a cap on the dollar, Hanao said. "The US
stockmarket will be a little bit toppish ahead of the year-end."
Nikko Trust and Banking foreign exchange manager Yasuji Yamanaka
expects a tight dollar range of 123.50 to 124.50 yen.
"Once we broke 123.40-50, last week, then the dollar traded really
on the strong side but it still seems that around the 125 level there
was some selling interest and also there is some psychological
resistance," he said.
"All the news yesterday and today will support dollar/yen, I guess,
but today we have the GDP numbers from the United States, and also the
weekend and month end, so still people will be nervous," he said.
Next week "we will have some numbers from the US --NAPM,
unemployment numbers. If the numbers are good, maybe we will resume the
strong dollar trend again. Otherwise, we will be stuck in a range."
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