Dollar remained weak as Bush offered no new leads in his State of the Union address

TOKYO, January 29 (IslamOnline & News Agencies) - The dollar remained weak against major currencies in Tokyo trading on Wednesday, January 29, after U.S. President George W. Bush’s State of the Union address offered no new leads, dealers said.

“Participants dumped the dollar before the speech because of a rumor that Mr. Bush might declare war against Iraq during his speech. But he didn’t say that,” said Mitsuru Sahara, vice president of foreign exchange at UFJ Bank.

“He kept his hard-line stance. It was basically nothing new to the market.” Sahara’s view was echoed in other parts of Asia.

“I think there is nothing new in the speech for the market to digest. President Bush did not give any clear indication on when war will start,” a dealer with a European bank said in Singapore.

The dollar traded at 118.10 yen at 2:05 pm (0505 GMT), compared with 118.52 dollars just before the speech, while the euro changed hands at 1.0860 dollars against 1.0838 dollars earlier in the day.

The dollar hit a low of 118.01 yen and the euro a high of 1.0880 dollars during the selling earlier in the session.

In New York Tuesday afternoon, January 28, the dollar traded at 118.60-70 yen with the euro buying 1.0820-0830 dollars.

The currency recovered some ground from its pre-speech low, but remained under pressure as the United States was expected to launch a war against Iraq in coming weeks, dealers said.

“Before the (morning’s) decline, the dollar was trading at mid-118 (yen) so I don’t think the dollar can regain that level. It’s still on the defensive,” Hideki Naito, managing analyst at MMS, was quoted by Agence France-Presse (AFP)

Bush warned during the speech that “if war is forced upon us, we will fight with the full force and might of the United States military - and we will prevail.”

He said that Secretary of State Colin Powell would present the U.N. Security Council with new evidence of Iraqi defiance of U.N. disarmament demands on February 5.

A speech by U.S. Treasury Secretary nominee John Snow, who spoke out in favor of a strong dollar policy at his confirmation hearing before the U.S. Senate Finance Committee on Tuesday, was largely discounted by players in Tokyo.

Singapore’s DBS bank added that the U.S. unit’s failure to rally after the Snow comment revealed the market’s strong urge to sell the dollar.

The dollar would remain weak against the yen in the short term, supported by rumors of intervention by Japanese authorities, dealers said.

“Next week we will see the foreign reserves published by the MoF (Ministry of Finance) so we can know if there has been intervention or not,” said Koji Fukaya, chief analyst at Tokyo Mitsubishi Bank.

“The dollar-yen will trade in a narrow range of 118-119 today, with the downside supported by rumors of intervention and the upside capped by exporters,” he said.     

Investors were also sidelined before the conclusion of a two-day rate-setting meeting by the U.S. Federal Open Market Committee later Wednesday.   

Against the yen, the euro was swapping hands at 128.28 at 2:05 pm, compared with 128.48 before the speech and 128.35-45 late Tuesday in New York.