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Nervous trading appears likely to continue on the currency market, keeping the dollar-yen rate moving between 120 yen and 125 yen.

Having climbed above 126 yen earlier this month, the dollar has given up much of its recent gains.

Finance Ministry officials have repeatedly warned against speculative yen selling, saying they are not seeking an economic recovery driven by a weak yen.

The yen’s recent fragility has provoked fierce criticism from Southeast Asia.

Finance ministers from the Association of Southeast Asian Nations ended their April 8 meeting in Kuala Lumpur with a statement warning that the yen’s weakness is posing a serious threat to the competitive ability of manufacturers in the region.

The National Association of Manufacturers of the United States has meanwhile cast doubt over the U.S. administration’s commitment to a strong dollar policy.

The market is trying to ascertain what will emerge from Saturday’s meeting in Washington of finance ministers and central bankers from the Group of Seven nations.

There are indications that international hedge funds have been engaged in a carry trade since early this year in an effort to bank on low Japanese borrowing costs.

In a carry trade, the funds borrow yen in Japan and convert them to dollars at higher interest rates elsewhere, using the money to invest in U.S. Treasury bonds.

Attention is focused on this week’s regular meeting of the governing board of the European Central Bank, following the U.S. Federal Reserve’s surprise interest rate cuts on April 18.

The Fed slashed the target for the federal funds rate by a half-point to 4.5 percent, bringing it below its European counterpart, which now stands at 4.75 percent.

While the Fed is expected to cut the key interest rate again at its May 15 meeting, it is speculated the ECB will leave its rate unchanged again.

Although the March euro zone consumer price index showed a 2.6 percent year-on-year rise, against the targeted 2 percent rise, the ECB appears more concerned about slowing economic growth in some euro zone states.

If the European rate is left unchanged, the euro may come under selling pressure.

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