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Euro gains on report China planning to buy Portugal bailout bonds.

TOKYO, May 26 Kyodo

The euro rose against both the dollar and the yen in Tokyo on Thursday following a report that China plans to buy Portuguese bailout bonds, but its upside was capped amid expectations that eurozone sovereign debts problems are unlikely to be resolved anytime soon.

At 5 p.m., the euro traded at $1.4176-4177 and 116.13-17 yen against $1.4083-4093 and 115.40-50 yen in New York and $1.4037-4039 and 115.22-26 yen in Tokyo at 5 p.m. Wednesday.

The dollar fetched 81.92-94 yen versus 81.91-82.01 yen in New York and 82.08-10 yen in Tokyo late Wednesday.

It moved between 81.66 yen and 82.09 yen, trading most frequently at 82.00 yen.

The euro strengthened in Tokyo after the Financial Times reported Thursday that Asian investors including the Chinese government are expected to be significant buyers of Portuguese bailout bonds when auctions are held next month, dealers said.

''The news prompted euro buying as it came at a time when the euro has been attracting buybacks following its recent falls on rekindled debt problems in the eurozone, especially in Greece,'' said Etsuko Yamashita, chief economist at Sumitomo Mitsui Banking Corp.

The single European currency also drew buying on news that Wang Yong, a professor at the People's Bank of China's training institute, said in a Chinese daily that China should expand its purchases of eurozone sovereign debt and should increase direct investment in Europe, dealers said.

But the euro's rise was capped as the sovereign debt problems in the eurozone will not be settled in the near future, a senior dealer at a Japanese bank said.

''With news such as the possibility of Greece leaving the eurozone emerging, it is hard to see how authorities are going to contain the problem,'' the dealer said.

The dollar, meanwhile, fell slightly against the yen as crude oil and gold were bought, but it generally remained in a tight range due to a dearth of major trading cues, the dealer said.
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Publication:Japan Weekly Monitor
Geographic Code:9CHIN
Date:May 31, 2011
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