Dollar Tops 113 Yen in Tokyo Ahead of Greenspan Testimony

Tokyo, July 20 (Jiji Press)–The dollar topped 113 yen for the first time in 14 months in Tokyo Wednesday on expectations that Federal Reserve Chairman Alan Greenspan will show a rosy outlook of the U.S. economy in his testimony later in the day.

At 5 p.m., the greenback stood at 113.05-08 yen, up from 112.59- 61 yen at the same time Tuesday, after moving between 112.77 yen and 113.19 yen. The dollar traded most actively at 112.99 yen, against Tuesday’s 112.33 yen.

The euro was quoted at 1.2062-2065 dollars, up from 1.1992-1994 dollars late Tuesday, and at 136.39-43 yen, up from 135.02-06 yen.

Speculators continued to snap up the dollar, sending the U.S. unit to break through the 113-yen line for the first time since late May 2004.

“Behind the dollar’s strength is the interest rate gap between the United States and Japan, together with the firmness of the U.S. economy,” said Kengo Suzuki, assistant manager at Shinko Securities Co.’s Foreign Exchange Department. “In his closely watched testimony, Greenspan is seen to say that the U.S. economy is solid and the Fed will continue raising interest rates.”

Market participants said that the dollar was also supported by yen selling versus other major currencies amid uncertainties about Japan’s political situation stemming from crucial bills for the privatization of the nation’s postal services.

Prime Minister Junichiro Koizumi has threatened to dissolve the House of Representatives for a snap election if the bills, now before the House of Councillors, the upper chamber, are voted down.

After the dollar buying spree ran out of steam, however, the U.S. currency was stuck in a tight band vis-a-vis the yen in the afternoon amid a growing wait-and-see mood.

Shinko’s Suzuki said that with long positions against the yen having been built up heavily in the market, a close watch is needed on whether the dollar will attract further buying or meet with profit-taking for now after Greenspan’s testimony.

Hideo Kumano, chief economist at the Dai-ichi Life Research Institute, said that the dollar’s rise above 115 yen could be in sight if Greenspan shows an optimistic view of the U.S. economy.END