Dollar likely to fall against yen this week

The U.S. dollar is expected to ease against the yen this week due to possible declines in the euro against the yen, dealers said.

Many dealers projected it to trade between 118 yen and 122 yen. The dollar touched a weekly high of 123.78 yen last Monday but fell to 118.80 yen Thursday, its lowest level here since March 7, after the euro fell against the yen in cross trading spurred by worries about the European economy.

When the euro is sold for yen, the dollar is usually an intermediary currency, with players selling the euro against the dollar and then the dollar against the yen. Concern spread after data Thursday showed slow growth in Germany amid rising prices. The euro then briefly dropped to 101 yen Thursday, its lowest level in Tokyo since December last year.

Selling was later curbed on fears of possible euro-buying intervention by monetary authorities, strengthening the dollar against the yen. Despite such fears, the euro may still lose ground, given the uncertainty in the European economy, dealers said.

But some expect the dollar to be well-supported since Japan's fundamentals do not justify a strong yen.

"The euro will be headed lower," said Yukihiko Hashimoto, foreign exchange manager at Sanwa Bank. "The European Central Bank has already cut rates and there is little the bank can do now as the German economy falters and signs of inflation increase," he said.

Many dealers said the euro's drop could push the dollar to 118 yen, while some said a fall to 117 yen is likely.

"I think the recent 120-125 yen range remains intact. Tokyo stocks are weak and wariness over the domestic economy prevails. We don't have good enough reasons to buy the yen," said Masayoshi Iwasaki, senior foreign exchange manager at Credit Lyonnais in Tokyo.