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Dollar gains in Tokyo

TOKYO: The dollar fell in late Tokyo as a sudden frenzy of selling emerged, erasing most of the gains made earlier on widespread expectations of a cut in German interest rates.

The selling was apparently led by U.S. funds and may have been touched off by a large offer around 97.50 yen, dealers said. Sales of marks for yen also pushed the dollar down.

Triggering of stop-loss selling of marks for yen was seen around 65.00 yen, undercutting the dollar's strength against the yen, with stop-loss selling subsequently also touched off in dollar/yen trade at 96.80 yen.

The dollar spent most of the day bouncing between buying on expectations of a German rate cut and profit-taking by investors and interbank operators. But its failure to sustain gains above 97.35 yen ultimately brought it down, dealers said.

After Tuesday's Federal Open Market Committee (FOMC) meeting ended with no change in U.S. interest rates, market attention shifted to the Bundesbank central council meeting on Thursday and the chance of a German rate easing.

Bundesbank President Hans Tietmeyer told the Japanese financial daily Nihon Keizai Shimbun that further German interest rate cuts would depend on inflation and money supply developments, a statement that helped whet operators' buying interest during the early part of the day.

Tokyo dealers said the results were hard to call, citing the notorious difficulty of predicting the German bank's moves.

"Although a rate cut surely is possible, especially given German economic conditions and lower-than-expected money supply growth recently, you never know with the Bundesbank. When they seem most as if they're going to cut rates, they don't," one local bank dealer said.

Many dealers said that even if rates are eased, it may be difficult for the dollar to break through the key 1.5 mark resistance level on that alone, and fresh incentives may be needed.

The mark stood at 64.96/98 yen in late Tokyo, down sharply from its midday 65.30 yen level but up from earlier lows.

A U.S. bank dealer in Singapore said sentiment against the mark remained bullish, but the dollar had to break through technical resistance at 1.4935 marks to really get set for a rise.-Reuter