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Dollar can’t hold on to early gains

JIJI

The dollar gave up gains to remain below the ¥102 line in Tokyo trading Monday, weighed down by speculation about a probable correction in stock prices following recent rises.

At 5 p.m., the dollar stood at ¥101.87-87, against ¥101.92-92 at the same time Friday. The euro was at $1.3592-3592, against $1.3608-3612, and at ¥138.45-47, against ¥138.70-72.

The greenback got off to a solid start after advancing as high as around ¥102.20 in U.S. trading on Friday on the back of another closing high by the Dow Jones industrial average.

But the greenback turned top heavy as concerns spread that both the U.S. and Japanese stock markets have risen too fast.

“Given a strong sense of caution on higher prices among stock investors and a halt in the long-term U.S. Treasury yield’s rises, it is difficult for the dollar to climb further vis-a-vis the yen,” an official at a major Japanese bank said.

The greenback was also dampened by the Australian dollar’s advance on the release of a stronger than expected preliminary reading in the HSBC China manufacturing purchasing managers’ index, traders said.

The flash manufacturing PMI for June rose to a seven-month high of 50.8 from 49.4 a month earlier.

“It would have been no surprise if the dollar had risen versus the yen in a ‘risk-on’ mood following the strong data,” a trading official said. But the greenback’s weakness against the Australian dollar eventually encouraged yen purchases, the official explained.

In contrast to the recent rapid stock rallies, the dollar has been stuck in a narrow range around ¥102.

“The currency market tends to turn volatile after a prolonged stalemate” an official at a major securities firm warned.

Meanwhile, a bank official said the dollar-yen pair is expected to remain range-bound on position-adjustment activities for the time being without fresh market-moving factors.