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Dollar rises to 117 yen level on Japan's weak machinery data.

TOKYO, Sept. 11 Kyodo

The U.S. dollar rose to the 117 yen level Monday in Tokyo in reaction to Japan's weaker-than-expected machinery orders data.

At 5 p.m., the dollar was quoted at 117.17-20 yen compared with its 5 p.m. Friday quotes of 116.90-117.00 yen in New York and 116.26-29 yen in Tokyo.

It traded between 116.61 yen and 117.33 yen during the day, most often at 116.76 yen.

The euro was quoted at $1.2689-2692 and 148.71-75 yen against its 5 p.m. Friday quotes of $1.2669-2679 and 148.20-30 yen in New York and $1.2722-2725 and 147.93-97 yen in Tokyo.

The yen was already sagging against the dollar in the morning on position adjustments after it rallied late last week on comments by a German finance official that the financial leaders of the Group of Seven economies will take up the issue of the yen's recent weakness at their talks scheduled for next weekend.

The poor domestic machinery orders data for July, revealed early in the afternoon, dealt a further blow to the Japanese currency as the reading shook market players' confidence in the recovery of the Japanese economy, dealers said.

Japan's core private-sector machinery orders plunged a seasonally adjusted 16.7 percent in July from the previous month, the biggest fall in 19 years, the government said. It was sharply weaker than the average market forecast of a 5.3 percent drop.

Ryohei Muramatsu, senior currency trader at Commerzbank, said the machinery orders data were ''shocking.'' ''With (Japanese) stocks being sold and long-term interest rates falling, buying of the euro and the dollar took the upper hand.''

''That the Japanese economy is on a solid recovery track has been a market consensus. But with some economic data recently raising questions about such a view, I think the view that the Bank of Japan will not carry out a rate hike for the time being has strengthened,'' Muramatsu said.

On Friday, the BOJ's policy-setting panel decided to hold its key short-term interest rate steady at 0.25 percent, after raising the unsecured overnight call money rate to that level from zero for the first rate hike in six years in mid-July. The timing of the next interest rate hike is a primary concern for the financial markets.

On Monday, Tokyo stocks closed sharply lower, with the key Nikkei index tumbling to a two-week low while the yield on the benchmark 10-year Japanese government bond also dropped.

Regarding Japan's revised gross domestic product data for the April-June quarter, released early in the morning, the market showed limited reaction as the readings were roughly in line with expectations.
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Publication:Japan Weekly Monitor
Date:Sep 11, 2006
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