November 21, 2001	Wednesday	Ramazan 5, 1422

TOKYO, Nov 20: The dollar eased on profit taking in Tokyo on Tuesday, while the market reacted hesitantly towards talk of a second supplementary budget to boost the Japanese economy, analysts said.

The greenback traded at 123.05-07 yen in Tokyo on Tuesday, against 123.24 yen in New York and 123.13-16 yen in Tokyo late Monday.

“We’re already seeing some people taking profits in dollars in Tokyo, said Kenneth Landon, senior currency strategist at Deutsche Bank. We’re coming up against some pretty stiff resistance against the yen at around the 124-level, so for the short term, it’s going to be pretty hard to push above that.

But the dollar looked to strengthen further against the yen as traders looked forward to a United States economic recovery next year and praised progress in the war in Afghanistan, Landon said.

Many traders also worried government calls for a second supplementary budget would result in further debt issuance, resulting in increased liquidity as the Bank of Japan (BoJ) buys up the new bonds, said Bank of Tokyo-Mitsubishi chief foreign exchange analyst Koji Fukaya.

Foreign investors believe that if the BoJ buys more JGBs (Japanese government bonds), it will push the yen to depreciate to 125 or so (against the dollar) but I think that the BoJ thinks this amount of expansion will not have so much of an effect, said Fukaya.

Ministers said Tuesday the government would meet soon to discuss a second supplementary budget to add to the $24.8 billion package it passed just last week.

However, Finance Minister Masajuro Shiokawa told reporters bond issuance would not increase.

The government will follow the 30 trillion-yen bond issuance cap even if the second supplementary budget is compiled, he said.

Tokyo-Mitsubishi’s Fukaya said the market’s reaction to the news was muted.

The stock market today shows the market thinks the second budget will not be effective, he said.

Maybe the budget will affect the economy but not so much on the fundamental side, Fukaya said. It will only support the yen a little.

The euro bought $0.8829-31 against $0.8784 in New York and $0.8816-19 in Tokyo late Monday.

Against the yen, the euro was quoted at 108.67, compared to 108.28 yen in New York and 108.57 in Tokyo Monday afternoon.

Analysts said the euro looked set to weaken further against the yen and dollar as the Ifo business sentiment index out of Germany due out Wednesday may confirm fears of a recession.

I tend to be a little bit on the bearish side on the euro this week, more neutral on the yen and dollar, said Landon, adding he forecasts the euro could be pushed down to 0.8680 against the dollar this week.

The Ifo is important but I think the market is already building in expectations of a recession in Germany, said Landon.

Landon said the market’s disappointment in the European Central Bank (ECB) has deepened as the bank, which meets again Thursday, looks more determined to do no more monetary easing.

I think the ECB has been making it perfectly clear that they intend to do nothing more at this point, said Landon.

The market would feel comfortable with the (US Federal Reserve) making the same decision because they’ve already done so much, but with the ECB, I think people were hoping for a little bit more stimulus, but they’ve been adamantly opposing that.

A BNP Paribas dealer in Singapore said sentiment was mixed ahead of the ECB meeting. Some are expecting more cuts but others are not so optimistic, he said.

In late Singapore trade, the US dollar fell to 52.15 Philippine pesos from 52.17 on Monday, 44.42 Thai baht from 44.46, 1.8396 Singapore dollars from 1.8424, 1,279 South Korean won from 1,284, 10,563 Indonesian rupiah from 10,608, and 34.483 Taiwan dollars from 34.487.—AFP