Monday July 10, 2006 - 22:14:26 GMT
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Reuters - www.reuters.com
FOREX-Yen hovers at two-week high vs euro; BOJ to meet
NEW YORK, July 10 (Reuters) - The yen hovered at a two-week high against the euro and was within striking distance of a one-month high against the dollar on Monday as investors anticipated the Bank of Japan will raise rates for the first time in nearly six years.
An early yen rally stalled midway through the New York session, however, particularly against the dollar, as investors waited to see what the Japanese central bank will signify for the future when it concludes its two-day monetary policy meeting on Friday.
"The market is pricing in a Bank of Japan move but not building momentum to buy yen," said Ron Simpson, director of currency analysis at Action Economics in Dobbs Ferry, New York. "I don't expected we'll see a series of hikes."
The dollar was up 0.1 percent at 114.17 yen late in New York with the yen's advance stalling after earlier touching 113.31 to the dollar.
The euro was down 0.4 percent against the yen at 145.43 yen , around levels last seen in late June and well off the record highs around 147.41 yen, according to Reuters data, hit last week. The euro had dipped as low as 144.99 yen earlier in the day.
Although there has been some opposition from Japanese government officials who called on the country's central bank to act cautiously, Economics Minister Kaoru Yosano told Reuters on Monday the time was ripe to discuss ending Japan's zero interest rate policy.
Sophia Drossos, G10 currency strategist with Morgan Stanley in New York, said the currency markets are focused on central bank activity.
"The risk-rewards just favor people to pare yen shorts going into the (BOJ) decision on Friday. I really think that has been the main catalyst," she said.
The euro was down 0.6 percent against the dollar at $1.2736 , off a one-month peak of $1.2861, according to Reuters data, established after a U.S. economic report on Friday showed fewer jobs were created in June than many had anticipated. The report tempered expectations for the Federal Reserve to raise rates at its next policy meeting in August.
The European Central Bank last week kept rates at 2.75 percent, as expected, but President Jean-Claude Trichet said the bank would "exercise strong vigilance," which was interpreted as signaling a rate hike on Aug. 3.
Henry Paulson was sworn in as U.S. Treasury Secretary on Monday, replacing John Snow. Paulson made no mention of dollar policy, and currency markets offered no reaction to his acceptance speech. For more detail, see [ID:nN10335493].
The dollar made its largest one-day gain in a month against the Canadian dollar , and was last at C$1.1244, up nearly 1 percent from Friday and at a two-week high. Futures markets show investors are looking for the Bank of Canada to keep rates on hold at 4.25 percent after its policy meeting on Tuesday.
Sterling was down 0.5 percent at $1.8413 in its largest one-day fall in three weeks. The dollar gained 0.6 percent against the Swiss franc to trade at 1.2300 francs .
Â© Reuters 2006. All Rights Reserved.
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