LONDON (AFX) - The yen remained firm but came off its earlier highs on profit-taking, while the euro and the pound continued to trade within a very tight range against the dollar.
The Japanese currency had staged sharp gains earlier in the day, with the dollar moving below the 116 yen mark for the first time in two weeks and the euro falling close to the 149 yen mark to reach its lowest level in six days.
The gains were sparked by very strong Japanese corporate capital expenditure data overnight and a surge in the Nikkei index of major Japanese stocks to three-month highs.
Profit-taking has also buoyed the yen after recent heavy selling, which took the currency to record lows of well over 150 yen per euro.
With interest rates unlikely to rise again in the near term, however, Japanese investors will still be looking elsewhere to find higher yields, limiting the yen's gains.
"Japanese investors are still looking for yield and this will encourage euro/yen bulls despite today's decent correction," said Russell Bloom at Thomson IFR Markets.
Elsewhere, however, the euro and the pound continued to trade within very tight ranges against the dollar. Volumes have been very thin with US markets closed for the Labor Day holiday today and ahead of a quiet week in terms of US data.
In the euro zone, PPI data this morning were roughly in line with expectations and had little impact on markets. Tomorrow, attention will turn to the release of the latest euro zone PMI survey on services sector activity, followed by July retail sales numbers for the region.
In the UK tomorrow, the UK's PMI services sector survey will be released, followed by the British Retail Consortium's latest retail sales monitor.
London 1608 GMT London 1324 GMT
US dollar
yen 116.04 up from 115.90
sfr 1.2287 down from 1.2293
Euro
usd 1.2865 up from 1.2861
stg 0.6753 up from 0.6752
yen 149.30 up from 149.06
sfr 1.5807 down from 1.5811
Sterling
usd 1.9049 up from 1.9047
yen 221.07 up from 220.77
sfr 2.3414 down from 2.3416
Australian dollar
usd 0.7710 up from 0.7708
stg 0.4047 unchanged
yen 89.45 up from 89.32
jessica.mortimer@afxnews.com
jkm/slm
