LONDON, Nov 13: The dollar on Tuesday rebounded from an 18-month low against the yen as Tokyo voiced concern about the recent spike in the value of the Japanese currency, dealers said.
The euro rose against the dollar, despite news that German investor confidence fell sharply in November.
In late European trade, the single currency climbed to $1.4595, from 1.4529 late in New York on Monday.
The dollar gained to 110.32 yen from 109.41 late on Monday, when it had also hit an 18 month low of 109.13 yen.
Fears that the Japanese central bank could step in to weaken the yen were circulating after Japan’s Prime Minister Yasuo Fukuda was quoted in the Financial Times as saying that the yen was rising “too fast.”
Geoffrey Yu at UBS said: “We think intervention by Japan at these levels is unlikely, but perhaps if dollar/yen were to fall more decisively towards 108, then such concerns would intensify.”
Meanwhile, the pound was firm, recovering from sharp falls on Monday, as data showed British headline annual inflation rose above expectations to 2.1 per cent in October from 1.8 per cent in September.
This takes the rate above the Bank of England’s 2 per cent target level for the first time since June and dents any lingering belief that the Bank of England will cut interest rates in December.
“The UK inflation data was pretty bad and dispels any idea that the Bank of England might cut rates,” said Mic Mills, a trader at TradIndex.com.
The euro also recovered from some of Monday’s losses against the dollar.
The single currency largely shrugged off a very weak German ZEW economic sentiment survey earlier, which showed the index slumping to a 15-year low of -32.5 in November from -18.1 in October, mainly due to the strong euro.
Ongoing worries over rising inflationary pressures are expected to keep the European Central Bank from cutting interest rates, however.
“This places the ECB in a tricky position, with the Bank walking a tightrope between higher inflation on the back of food and energy prices and increased growth risks as a result of the fallout from the US sub-prime market,” said Stuart Bennett, senior forex strategist at Calyon.
In late European trade on Tuesday, the euro changed hands at $1.4595, against $1.4529 late on Monday, at 161.02 yen (159.01), 0.7043 pounds (0.7075) and 1.6426 Swiss francs (1.6407).
The dollar stood at 110.32 yen (109.41) and 1.1255 Swiss francs (1.1288).
The pound was at $2.0725 (2.0530).—AFP