950804

Dollar ends mixed after

rally to 5-month high

NEW YORK: The dollar on Thursday ended mixed in the U.S. as traders turned cautious after Wednesday's surge to a nearly five-month high on joint intervention by U.S. and Japanese monetary authorities.

"There's been a modest pullback," said Bob Lynch, currency analyst at MMS International, who said traders took the opportunity to take profits after the sharp rise.

Yet he added: "The Fed and the Bank of Japan have managed to get the dollar back above the 90-yen area. If we can stay in that range, the near-term outlook remains favorable."

The dollar closed in the U.S. at 90.44/49 yen, little changed from the opening at 90.45/50 yen. It fell to 1.3902/07 marks from 1.3932/37 marks at the open.

On Wednesday, the dollar hit a high of 91 yen after the Federal Reserve Bank of New York banded together with the Bank of Japan, buying an estimated $500 million for yen in an effort to bolster the U.S. currency.

In addition to the intervention, another factor in the dollar's rally on Wednesday was the surprise news that the Japan's government was liberalizing investment rules in order to promote overseas investment by Japanese firms.

The Japanese government, which has been concerned about the devastating effects on the strong yen on the economy, hopes that it can rein it in by encouraging flows of capital out of the country.

That possibility and the sign of a commitment by U.S. officials to strengthening the dollar made traders optimistic about the dollar's longer term prospects. Nevertheless, players were still assessing the degree to which the dollar could gain further on those developments.

"The market will probably have a couple of days of reassessment," said Diego Giurleo of Royal Bank of Canada. "Short of any intervention announcement, we'll probably see range trading," he said.

Hubert Pedroli, foreign exchange manager at Credit Suisse, said the move by the Japanese government to encourage foreign investment was "a step in the right direction," but he said Japan would have to take further steps to open its economy before the yen could decline significantly.

Moreover, Steve Jonathan, vice president at Merrill Lynch and Co, said it is unclear whether the dollar will be the main beneficiary of that any move out of the yen, noting recent signs of investor interest in Europe.

"We are seeing people sell yen to buy marks. There still seems to be a reluctance to move into dollars," Jonathan said.

Helping to restrain activity somewhat was nervousness ahead of the government's key monthly employment report, which is due out Friday.

U.S. economists in a Reuter survey expect the report to show that companies payrolls grew by a rather modest 111,000 in July after a 215,000 increase in June.

"There's some concern that if we have a softer payrolls number for July and if they revise the June number downwardly, the dollar could sell off a bit," Jonathan said.

At the close, the dollar was at 1.1485/95 Swiss francs versus the opening at 1.1530/40 Swiss. It was at Canadian $1.3595/00 from C$1.3580/85. Sterling rose to $1.6055/65 from $1.6033/40. The Australian dollar closed at $0.7370/75.

At midday, the Morgan Guaranty trade-weighted index stood at 90.6 percent of its 1990 trade-weighted value.-Reuter