US dollar softer in Tokyo afternoon trade as more US rates seen unlikely

TOKYO (XFN-ASIA) - The US dollar was softer against the yen and euro in early afternoon trading here, amid growing conviction that the US Federal Reserve will not resume its series of rises in interest rates, dealers said.

At 12.19 pm (0319 GMT) here, the dollar was at 115.62 yen, down from 115.72 yen in Sydney nearly two hours earlier. The euro was at 1.2877 usd, up from 1.2865 usd in Sydney.
The belief that the Fed will not resume raising interest rates was supported by US consumer sentiment data released Friday, dealers said. The University of Michigan preliminary consumer confidence index dropped to 78.7 this month from 84.7 last month. The median forecast for this month had been 83.8.

Dealers said that, with the market lacking strong leads today, players were waiting for some important events this week. These are the release of data on new home sales in the US last month, a speech by Fed chairman Ben Bernanke and the release of the Japanese consumer price index (CPI) for last month, which is being calculated using a new method.
"[Japanese] market participants here have returned to the market [from their summer vacation last week] but the market is moving in a narrow range," said Daisuke Uno, a strategist at Sumitomo Mitsui Bank.

"The market is more or less likely to respond to the upcoming new homes data and Berkanke's speech, and Japan's July CPI for further clues about the Fed's next possible move," he said.
"Basically, participants are interpreting the Fed's move earlier this month as an end to its rate-hike series, rather than just a pause, given that the US inflation readings have shown a drop," Uno said.

Norihiro Tsuruta, a senior currency analyst at Shinko Research Institute, said participants would be looking in particular at Bernanke's speech, which will be his first since the Fed paused in its series of increases in interest rates.

"The US economic indicators so far have shown both strong and weak readings. That is why participants are so curious about what he is going to say," Tsurata said.

Tokyo 12.19 pm (0319 GMT) Sydney 11.20 am (0120 GMT)

US dollar
yen 115.62 down from 115.72
sfr 1.2276 down from 1.2294

Euro
usd 1.2877 up from 1.2865
stg 0.6827 up from 0.6825
yen 148.88 up from 148.85
sfr 1.5808 down from 1.5813

Sterling
usd 1.8861 up from 1.8847
yen 218.07 up from 218.06
sfr 2.3154 down from 2.3163
Australian dollar

usd 0.7595 up from 0.7588
stg 0.4027 unchanged
yen 87.813 down from 87.835


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