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Traders bet on Japanese yen because of intervetion

The dollar remained on the back foot against the euro in late trade Friday as investors closed out positions following slightly better than expected US trade data, analysts said.

The single European currency stood at US$1.1812 against US$1.1739 late on Thursday in New York.

The dollar traded at ¥108.52 against with ¥109.06 on Thursday.

The US currency had enjoyed a brief respite from its slide earlier in the day ahead of the trade data but suffered renewed weakness following its release.

The US trade deficit narrowed in August as both imports and exports declined.

It shrank by 2.1 percent to US$39.2 billion, against expectations of a US$41.2-billion deficit.

Against the yen, the dollar succumbed further as investors continued to test the Bank of Japan's willingness to intervene ahead of a long weekend in both Japan and US.

"The markets are still testing whether the BoJ will draw a line in the sand," said Standard Chartered forex stragetist David Mann.

The yen's renewed rally came despite an apparent easing in monetary policy in Japan.

The Bank of Japan said it is moving to ease credit to support Japan's economic recovery and relieve upward pressure on the yen, and is also taking steps to improve communication with financial markets.

"While easing should, in principle, be marginally yen bearish, any such effect is overwhelmed by continuing fall-out from the Dubai G7 policy shock and perceptions the Bush administration wants a substantially weaker dollar," said Bank of America currency strategist Uwe Parpart.

"We revise our short-term dollar/yen forecast downward to ¥107 to ¥112 through end-November, but expect recovery to the ¥112 to ¥115 range by end-December as Japanese expansion slows and the US-Japan growth and interest-rate differentials widen," he added.

The euro was changing hands at US$1.1812 from US$1.1739 late on Thursday in New York, ¥128.17 (¥128.02), £0.7090 (£0.7043) and 1.5485 Swiss francs (Sf1.5466).

The dollar was being quoted at ¥108.52 (¥109.06) and 1.3114 Swiss francs (Sf1.3174).

The pound was at US$1.6659 (US$1.6657), ¥180.79 (¥181.70) and 2.1845 Swiss francs (Sf2.1955).

On the London Bullion Market, the price of an ounce of gold was at US$372.30 dollars against US$370.60 on Thursday afternoon.
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