Forex - Dollar weakens in Tokyo

The dollar weakened in midafternoon in Tokyo on concerns over the US economy after the Federal Reserve cut interest rates by a surprise 50 basis points overnight, dealers said.

Thu, 07 Nov, 2002 - 05:58

The dollar weakened in midafternoon in Tokyo on concerns over the US economy after the Federal Reserve cut interest rates by a surprise 50 basis points overnight, dealers said.

However, investors were mostly sidelined ahead of an interest-rate setting meeting by the European Central Bank, with expectations of a possible monetary easing after the Fed's move.

Finance Minister Masajuro Shiokawa said currency rates should be determined by the market and not manipulated by the government despite the continued fall in the dollar.

"The rate cut, which was bigger-than-expected, underlined concerns over the US economy. Except housing sales, recent economic indicators showed the US economy is not in good shape," said Kiyotaka Ishikawa, dealer at Mizuho Bank.

"The euro-dollar trade was stuck in a narrow range as investors took a wait-and-see stance ahead of the ECB meeting," Ishikawa said.

"It is widely expected the ECB will cut interest rates in line with the move in the United States."

MMS managing analyst Hideki Naito said the release of Cabinet Office data on capital expenditure and economic confidence does not appear to have any major impact on the dollar/yen, though the dollar's downtrend is intact.

Japanese firms expect three months to September capex to have risen by 1.5% from the previous quarter, compared with a fall of 9.0% in the June quarter, a survey of 4,561 firms by the Cabinet Office found.

However, the Cabinet Office also said the index of confidence in economic conditions in the quarter to September reached minus 22, compared with minus 14 in the June quarter, and a forecast in the earlier survey of minus 4.

"The trend remains with the dollar relatively under pressure," Naito said after the release of the Japanese figures.

"The market is carefully waiting for the ECB decision."

Tokyo 2.25 pm Tokyo 11.50 am Sydney 9.30 am

Dollar

yen 121.65 down from 121.90 121.72

sfr 1.4556 down from 1.4563 1.4574

Euro

usd 1.0049 up from 1.0044 1.0042

stg 0.6425 unchanged 0.6425 0.6423

yen 122.24 down from 122.43 122.24

sfr 1.4627 unchanged 1.4627 1.4634

Sterling