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Greenback endson firm note in Tokyo

TOKYO: The dollar was firmer in late Tokyo against both the yen and the mark, but off earlier highs and stalled amid a lack of fresh factors.

Dealers emphasised that sentiment remains strong overall, but that the stage is currently not yet set for the dollar to challenge the heights again, especially before the release of key U.S. inflation data later today and on Friday.

"Activity has been lessening throughout the afternoon as operators lose interest in active trading, making a break above (the recent high) of 108.70 yen unlikely today. But the downside is still quite firm," a trust bank dealer said.

Buying of Australian dollars for yen in morning trade also helped give the U.S. dollar some support, but not enough to enable it to rise much.

By late Tokyo the greenback appeared stuck between 108.10-20 yen, where fairly strong bids were detected, and the chance of profit-taking from 108.70 yen on up. Support against the mark was 1.4950 marks and resistance just over 1.5000 marks.

A small mid-afternoon buying spurt was set off by a Financial Times article in which Bundesbank President Hans Tietmeyer held out the possibility of further German interest rate cuts, adding that he also expected a reversal of last year's sharp rise of the mark against the dollar and other currencies to continue.

Tietmeyer said last year's "exchange rate shock" had been largely corrected "and there are chances that it will correct itself still further".

He added that the Bundesbank will "assess carefully" whether there is scope for a further reduction.

But dealers were sceptical about the article's overall impact and the dollar fell back soon after. "It seems difficult to see that much buying on these statements, as they are not so different from things he's said in recent days. Mainly the article seems to have emphasised the Bundesbank's stance and given some people confidence to buy," one said.

The market will be interested to see what figures emerge from the U.S. March producer price index (PPI) and consumer price index (CPI), due out at 1230 GMT today and Friday, respectively. Concerns about inflation after commodity prices spiked pounded U.S. stocks and bonds in Wednesday trade.

"Even though the connection between U.S. bonds and the dollar has weakened recently, we still want to watch how they respond to the data," another trust bank dealer said.

A Reuters poll of economists yielded an average forecast of a 0.4 percent increase in the PPI against an 0.1 percent increase in February.

The Australian dollar was at 85.94/04 yen after moving between 85.39 and 86.02 yen.

Singapore dealers were bullish, seeing the dollar trying 109 yen and possibly 1.51 marks in European time.