WSJ:WORLD FOREX: Dollar Hits 4-Month Low Vs Yen, China Data Help Euro
--Dollar falls to four-month low at Y78.48 early Wednesday in Asia.
--Japanese yen-selling intervention unlikely for now as the currency's gains are mainly a product of the euro's fall.
--Strong Chinese GDP and industrial production figures buoy the euro and other risk-sensitive currencies.
By Andrew Monahan
Of DOW JONES NEWSWIRES
TOKYO (Dow Jones)--The dollar dropped to a four-month low against the yen in Asia Wednesday, as talks on the U.S. debt ceiling became bumpier, while mounting concerns over contagion of euro-zone debt problems left the Japanese currency as the least unattractive option.
In thin trade early Wednesday morning in Asia, the dollar fell to Y78.48, its lowest since March 17. Yet unlike that day, when the greenback's slide to a post-World War II low at Y76.25 ramped up pressure for intervention-which came the following day-Japan's currency authorities seemed unlikely to wade into the market for now.
"The time is not yet ripe for action" as yen-selling intervention could prove futile without progress solving the European debt woe, which has been the primary driver of the Japanese currency's recent rise, said Masafumi Yamamoto, chief currency strategist in Japan for Barclays Bank.
Another reason Japan's finance ministry, which decides the country's currency policy, is unlikely to order up intervention now is that the yen's strength hasn't prompted any sharp sell-off in equities, analysts and traders said.
The benchmark Nikkei Stock Average ended up 0.4% at 9963.14 Wednesday, holding well above the 9000 mark that analysts cite as a potential trigger for possible intervention.
Japan's Finance Minister Yoshihiko Noda signalled growing concern over the yen's moves earlier in the day, calling them "a little one-sided," though he avoided the stronger jawboning Japanese authorities have used before to presage actual intervention.
"The surprisingly steady Nikkei suggests that markets do not believe Japanese corporate profits will be severely affected by recent yen strength," said Barclays' Yamamoto.
The view that Japan likely won't intervene for now gave the green light to Japanese importers and other market participants to bargain hunt the greenback after its earlier fall, dealers said.
At 0450 GMT, the dollar had recovered to Y79.44, up also from Y79.25 late Tuesday in New York.
But dealers cited the breakdown Tuesday in talks between U.S. congressional leaders and President Barack Obama on raising the country's debt ceiling, as an August 2 deadline looms.
The U.S. unit could also face further selling later in the day, if Federal Reserve Chairman's Ben Bernanke's testimony before the House Financial Services committee adds to speculation the Fed is growing increasingly dovish given recent weakness in economic indicators, said Yuzo Sakai, manager of business promotion at the brokerage Tokyo Forex & Ueda Harlow.
"After the Federal Open Market Committee minutes from the June meeting released yesterday showed that further monetary stimulus was considered, there will be careful scrutiny of Bernanke's remarks today," Sakai said.
Strong Chinese economic data buoyed regional equities and risk-sensitive units such as the euro and Australian dollar. The country's gross domestic product rose 9.5% on year in the second quarter, exceeding expectations for a 9.4% rise. Industrial production was up 15.1% on year in June, beating forecasts for a 13.1% rise.
While any further increases in China's consumer prices could have the opposite effect, by increasing concern over further monetary tightening, "people took today's numbers as a positive sign for sustained, robust economic growth," said Tokyo Forex & Ueda Harlow's Sakai. But any further rebound in the euro will be limited by concern over further debt problem contagion, after Moody's downgraded Ireland's sovereign rating to junk Tuesday, he said.
At 0450 GMT, the euro was at $1.3988 compared with $1.3975, and at Y111.11 compared with Y110.75. The ICE Dollar Index was at 75.974 from 76.011.
Interbank Foreign Exchange Rates At 00:50 EDT / 0450 GMT
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