For Japanese looking to travel to the United States this year, the best exchange rates for the yen are likely to last until around June — that is, if market predictions prove to be correct.

After that, the yen is expected to weaken against the U.S. currency, so instead of spending abroad, one might be better off putting savings in dollar deposits.

Many dealers and market analysts predict that in the first half of this year, the dollar will come under downward pressure from geopolitical tensions.

But for the latter half they forecast that the dollar will rise against the yen as U.S. policies such as tax cuts pave the way for an economic recovery there.

The core range predicted for the year as a whole is between 115 yen and 135 yen.

Some said dollar-yen trading could be trapped in an even narrower range.

“The economies of the United States, Japan and Europe are all frail, and the authorities of each country will want to weaken their currency,” said a dealer at a Tokyo-based hedge fund. “With no economy doing particularly well, there will be little sense of direction in the market.”

Last year, the dollar rose to the year’s high of 135.20 yen in January on comments by U.S. Treasury Secretary Paul O’Neill supporting a strong dollar policy and on a fall in Prime Minister Junichiro Koizumi’s approval ratings.

The U.S. currency dropped to the year’s low of 115.50 yen in July as the series of U.S. corporate accounting scandals spawned concerns about the U.S. economy.

The dollar will be most vulnerable in the early part of this year, dealers and economists said.

“The possibility of a U.S. attack on Iraq will weigh heavily on the dollar, particularly in the first few months,” said Kazuyuki Tazawa, senior economist at Sumitomo-Life Research Institute. “If war really does erupt, the market will focus on the negative repercussions on the U.S. economy.”

“The prospect of terrorist acts and the uncertain relationship between the U.S. and North Korea could spark sudden declines in the dollar,” said Daisaku Ueno, senior economist at Nomura Research Institute.

But they also said that if the U.S. does attack Iraq, the negativity will lift from the U.S. currency.

“Once the tensions recede, the trend will be for a stronger dollar,” said Tomoko Fujii, director of economic and market analysis at Nikko Solomon Smith Barney. “People will return their assets to the U.S., encouraged by signs of a U.S. economic pickup that will probably begin to appear around the fall.”

A few said they see the dollar rising as high as 140 yen.

Some dollar-bulls said the dollar will be relatively firm throughout the year since Japan will continue to aim for a weaker yen to help its exports.

Finance Minister Masajuro Shiokawa has repeatedly indicated that he would like to see the dollar in a range between 150 yen and 160.

“Japanese financial officials will try to keep the yen weak by making comments and intervening in the market, so the dollar won’t be losing a lot of ground,” said Daisuke Uno, chief market analyst at Sumitomo Mitsui Banking Corp.

He said the dollar is likely to be well-supported at 118 yen.

Keizo Tanaka, foreign-exchange manager at Asahi Bank, agreed. He said that U.S. policy for a strong dollar will remain unchanged under John Snow, who has been nominated to replace Paul O’Neill as treasury secretary.

“U.S. authorities will continue to advocate a strong dollar,” Tanaka said, “and with U.S. economic fundamentals likely to be somewhat better than those in Japan, the yen won’t be actively bought.”

Uncertainty about the Japanese banking sector, which is saddled with massive bad loans, will overshadow the yen, said Ken Fujii, foreign-exchange manager at Mitsubishi Trust & Banking Corp.

“Among the major currencies, the yen will be regarded No. 1 in the contest for unattractiveness,” he said.

Meanwhile, dollar bears said given Japan’s trade surplus with the U.S., the yen is likely to hold relatively strong against the dollar.

They noted a U.S. attack on Iraq would be more detrimental to the dollar than many players expect.

“The dollar could plunge as low as 105 yen when an attack occurs,” said Hidenobu Fukuhara, foreign-exchange manager at Daiwa Bank. “After going that far, it won’t be easy for the dollar to recover. Its climb will be limited to 125 yen.”

Ryohei Muramatsu, foreign-exchange manager at Commerzbank in Tokyo, said a war with Iraq will seriously undermine the U.S. economy.

“The military expenses will be massive and the consequences far-reaching,” he said. “Compared with the damage to the U.S. economy, the Japanese economy will look better because it can’t get worse than it is now.”

In addition, players will be inclined to sell the U.S. currency on views that U.S. authorities will secretly want a weaker dollar to enhance the competitiveness of U.S. exports, Muramatsu said.

“Of course the authorities will never say out loud that they want a weak dollar,” he said. “But the market will see below the surface.”

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