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Dollar top-heavy above ¥94.50

JIJI

The dollar failed to gain further ground above ¥94.50 in Tokyo trading Monday after rising moderately in line with the euro’s rebound on the back of a eurozone accord on a new bailout for financially troubled Cyprus.

At 5 p.m., the dollar stood at ¥94.57-62, against ¥94.58-61 at the same time Friday. The euro was at $1.2995-2998, up from $1.2901-2904, and at ¥122.95-97, up from ¥122.03-05.

In early trading, the dollar rose in step with the euro surge against the yen after Cyprus clinched a last-minute deal on the bailout program of up to €10 billion in return for closing its second-largest bank and inflicting losses on uninsured deposits of over €100,000 at its two largest banks.

Cyprus avoided worst-case scenarios, such as an exit from the eurozone, an official at a foreign exchange margin trading service firm said, welcoming the agreement.

But the dollar gave up earlier gains due to selling by real demand-backed players with the approach of the end of the fiscal year Sunday, market sources said.

“The dollar’s upside was capped by selling from Japanese exporters at levels near ¥95,” an official at a foreign exchange broker said.

The dollar was later stuck in a narrow range below ¥95 in the absence of fresh trading incentives.

“The market had largely factored in the Cyprus aid accord based on news reports late last week,” a European bank official said.

After the Cyprus rescue deal, a close watch is still needed for possible negative effects on the market from losses on large deposits, an analyst at a major Japanese bank said.

An official of another major bank said, “Investors are finding it difficult to tilt their positions either way” before the Bank of Japan’s policy-setting meeting on April 3-4.

Junya Tanase, chief foreign exchange strategist at JPMorgan Chase Bank, said overseas investors seem to have excessive expectations for the BOJ’s policy measures under new Gov. Haruhiko Kuroda.

“If the BOJ fails to meet the market expectations, selling by disappointed investors may push down the dollar to around ¥90 late this month or early next month,” Tanase added.