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By Kazunori Takada
TOKYO - The dollar edged higher on Wednesday after a surprise fall in New York trade, but its gains were limited with traders saying the market lacked clear direction. The dollar found some support on bargain-hunting after being pulled down to a nearly one-week week low of 117.97 yen in U.S. trade on weak U.S. consumer sentiment figures.
"I think many players are hesitating after last night's fall," said Noriyuki Kato, head of foreign exchange section at ING in Tokyo.
As of 10:21 p.m. EDT Tuesday, the dollar stood at 118.42 yen against 118.10 in late New York.
The euro was at 98.12 cents compared with 98.27 in late U.S. trade. It was steady at 116.19 yen against 116.17.
With the market lacking clear direction, most players expect the dollar to stay rangebound against the yen.
"I think it will hold above 118," said Koji Fukaya, chief forex analyst at Bank of Tokyo-Mitsubishi. "A fall under that level could lead to further selling to around 116, but there are not enough "sell" factors."
Dealers also saw limited room for a rise in the dollar over the possibility of a U.S. attack on Iraq after Vice President Dick Cheney called for a pre-emptive strike against President Saddam Hussein.
"This Iraq issue is constantly weighing on the dollar," said ING's Kato.
MIXED U.S. ECONOMIC DATA
The dollar briefly got a lift from strong U.S. durable goods orders, which rocketed 8.7 percent in July, against market expections of a modest rise of 1.2 percent.
But it soon came under selling pressure after the Conference Board, a business-backed research group, said its index of consumer attitudes fell to 93.5 in August from 97.4 in July. Analysts had expected the index to come in at 97.0.
Wall Street also fell after the consumer confidence data with the Dow Jones industrial average ending down more than one percent and failing to close above 9,000, while the tech-heavy Nasdaq slumped more than three percent.
Analysts said the confidence figures were more important than the durable goods numbers because consumer spending represents two-thirds of the U.S. economy. Traders said the market was looking forward to the German Ifo economic institute's business confidence index due at 4 a.m. EDT. The figure is expected to drop for a third month in a row, confirming the sluggish pace of Germany's recovery.
"It's really hard to predict these figures," said ING's Kato. "I don't know how much the market has factored in the weak figures, but if the data turns out to be stronger than expected, the euro could rally."
Further down, the market will take another look at the U.S. economy on Friday with the release of Chicago Purchasing Managers Index, a key gauge of manufacturing activity in the Midwest.
Also on Friday, U.S. Federal Reserve Chairman Alan Greenspan is to give opening remarks at the Kansas City Fed's annual economic symposium.