TOKYO, Jan 22: The dollar rocketed to a new three-year high against the yen on Tuesday on speculation Washington accepted a weaker Japanese currency despite a warning from US Treasury Secretary Paul O’Neill, dealers said.

The greenback traded at 133.92 up from 132.58-63 yen in London and 132.36-39 yen in Tokyo late Monday.

Markets in the United States were closed Monday for a public holiday.

The last time the Japanese unit saw such levels was in October 1998.

Japan itself has no intention to pursue a weak yen intentionally as an economic policy measure and in the meeting O’Neill told me that forex moves should be determined by market forces, Finance Minister Masajuro Shiokawa told reporters after a meeting with his US counterpart.

That comment was taken to mean the United States accepted the current weak yen, said Kazuhiro Kaneko, dealer at Mizuho Trust Bank.

But O’Neill told a news conference later that he “did not engage directly” in foreign exchange issues with Shiokawa.

The dollar was sold off a bit (after this), said UFJ Bank foreign exchange manager Takayuki Togawa, although the long term trend remains yen-negative.

We may see 135 yen this week, Togawa said, adding that 140 yen was possible over the next month.

O’Neill warned Japan should not try to bolster its economy by pushing the yen lower.

Exchange rate modifications can do nothing to fix a mountain of problem loans... or to improve underlying rates of productivity, he told a news conference at Japan’s National Press Club.

But market sentiment saw the dollar pushing up further.

It looks like it will go higher. It is really weird as the market is trying to get to grips with what has been said, a trader with Barclays Capital said.

Against the dollar, the euro bought 0.8845, down from $0.8827-37 in London and $0.8845-47 in Tokyo late Monday.

In late Singapore trade, the dollar slipped to 10,384.50 Indonesian rupiah from 10,388 on Monday but gained ground against the other Asian units.

It rose to 44.1 Thai baht from 43.9375 on Monday, 51.275 Philippine pesos from 51.23, 1.8379 Singapore dollars from 1.8331, 1,331.45 South Korean won from 1,320.3501, and 35.0635.—AFP