Reply #15: Yen softens after Paulson comments [View All]

[Ghost Dog]

http://asia.news.yahoo.com/070207/afp/070207125409eco.html

LONDON (AFP) - The yen pared recent gains against the dollar after US Treasury Secretary Henry Paulson signalled that he would not pressure Japan to bolster its currency.

The euro meanwhile edged closer to 1.30 dollars ahead of Thursday's interest rate decision from the European Central Bank (ECB).

The euro firmed to 1.2985 dollars in early European trading Wednesday from 1.2979 dollars late in New York on Tuesday. The dollar climbed to 120.46 yen from 120.09 yen on Tuesday.

The Japanese currency has rebounded from last week's four-year lows against the dollar on concerns that world finance chiefs might seek to talk up the value of the yen at the weekend G7 meeting starting Friday.

Paulson told Congress there was no evidence of Japanese intervention to unfairly depress the yen's value and that the currency was traded on competitive markets. While Paulson reiterated concerns about the value of the yen and the Chinese yuan, he suggested no particular course of action to address the issues.

Dealers said the yen's recent rally was therefore likely to be only temporary.

"There is a widespread consensus now expecting no reference to the yen following the repeated comments from US Treasury Secretary Paulson that the yen is a free-floating currency," said Derek Halpenny, senior currency economist at The Bank of Tokyo-Mitsubishi.

In the run-up to the meeting, much debate has been focused on the declining value of the yen, which penalises eurozone exports. And the European members of the G7 have been pushing for the matter to be discussed. But the US has indicated that it would not take part in any concerted effort to drive the yen higher.

Elsewhere, the ECB was widely forecast to leave eurozone borrowing costs unchanged at 3.50 percent on Thursday. Bank of England policymakers also reveal their latest monetary policy decision on Thursday and are expected to keep rates at 5.25 percent -- the same level as US borrowing costs.

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