Dollar stays firm as Japan keeps intervention pressure

The dollar kept its strength in Asian trade Thursday as Japan continued to pressure the market with threats of intervention to sell down the yen to safeguard the Japanese economy.

The dollar was trading at 85.49 yen in Tokyo morning trade, from 85.72 in New York late Wednesday.

But the yen's level was sharply higher than a 15-year high of 82.86 to the dollar reached Wednesday morning in Tokyo, moments before Japan stepped into the financial markets to dump the yen.

The euro stood at 1.2994 dollars and 111.09 yen in Tokyo, also easing from 1.3009 dollars and 111.50 yen in New York.

Japanese Prime Minister Naoto Kan reiterated Thursday that Japan would take "resolute actions" in currency markets when necessary after his finance ministry intervened to stem the strength of the yen.

"We are determined not to allow the drastic fluctuation of the yen," Kan told a business conference in Tokyo, in comments that indicate Japan is prepared to intervene again.

Japan on Wednesday stepped into the currency markets in Japan, Europe and the United States for the first time since 2004 in a bid to stem the yen's appreciation against the dollar and help safeguard a faltering recovery.

The scope of the intervention on Wednesday alone was more than two trillion yen (23.4 billion dollars), the Nikkei business daily estimated.

With more possible interventions in the pipeline, the Bank of Japan planned to leave the yen capital in the market in a step similar to monetary easing, the Nikkei said.

Goldman Sachs Global Markets team said Tokyo may continue to intervene in response to similar volatility.

But the brokerage pointed to the possibility of further weakening of the dollar as the Japanese intervention is unlikely to receive the support of other governments.

Goldman Sachs also expected the US Federal Reserve would embark on another round of large-scale quantitative easing later this year, which could lead to lower US rates and a weaker dollar.

Yuichiro Harada, senior dealer at Mizuho Corporate Bank, said the broader weak tone of the dollar had remained unchanged despite the Japanese intervention. AFP