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Dollar dips to lower 91 yen on lower U.S. bond yields, exporter selling.

TOKYO, Oct. 28 Kyodo

The U.S. dollar fell into the lower 91 yen zone Wednesday in Tokyo as a drop in U.S. bond yields dented the appeal of the currency and Japanese exporters sold their dollars for the yen.

At 5 p.m., the dollar fetched 91.15-17 yen versus Tuesday's 5 p.m. quotes of 91.75-85 yen in New York and 92.03-05 yen in Tokyo.

The currency moved between 91.07 yen and 91.81 yen, trading most frequently at 91.15 yen.

The euro traded at $1.4826-4828 and 135.14-18 yen against late Tuesday's quotes of $1.4800-4810 and 135.83-93 yen in New York and

$1.4887-4888 and 137.01-05 yen in Tokyo.

The dollar fell against the yen after the U.S. consumer confidence index announced by the Conference Board failed to beat market forecasts and clouded the outlook for the nascent economic recovery in the United States, dealers said.

The currency also met with selling by Japanese exporters, they added.

The U.S. consumer confidence index fell to 47.7 from 53.4 in September, below the average market forecast of 53.5.

Following the disappointing U.S. data, yields on U.S. bonds -- indicators of long-term interest rates -- fell and dented the appeal of the dollar relative to the yen, they said.

''There are players, mainly short-term players selling dollars (against the yen) on the fall in (U.S.) long-term interest rates,'' said Osamu Takashima, chief analyst of the global markets sales and trading division at the Bank of Tokyo-Mitsubishi UFJ.

Analysts said since the beginning of this week, investors have been cutting their risky but high-return assets for the dollar. But against the yen, the dollar has been weakening due to the falling U.S. bond yields.

The U.S. Treasury Department has launched a series of U.S. bond auctions that will total $123 billion by the end of this week.

''Other than the fall in U.S. long-term rates...(market participants) are also trimming their risky assets ahead of economic data such as (U.S.) gross domestic product,'' for the July to September period due out Thursday, a senior trader at a Japanese bank said.

''If (U.S.) long-term rates continue to fall after the remaining auctions this week, it would lead to dollar selling,'' he added.

The risk-sensitive euro, meanwhile, fell against the yen after Asian stock markets performed poorly and reduced investor preference for risk, dealers said.

Looking ahead, BTMU's Takashima said the dollar will likely trade between 91 and 92 yen until next week's Federal Open Market Committee meeting.

''The currency market will likely remain vigilant against the possibility of it (the Federal Reserve) changing its wording in its post-meeting statement,'' he said, referring to market speculation that the central bank may indicate a step toward tightening its monetary grip.
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Publication:Japan Weekly Monitor
Date:Nov 2, 2009
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