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Dollar falls to lower 105 yen after rising on AIG bailout+
(Japan Economic Newswire Via Acquire Media NewsEdge) TOKYO, Sept. 17_(Kyodo) _ The U.S. dollar dropped to the lower 105 yen level after briefly rising to the upper 106 yen level Wednesday in Tokyo as dollar-buying momentum on the U.S. Federal Reserve's rescue package for the largest U.S. insurer, American International Group Inc., disappeared later in the day.
At 5 p.m., the dollar fetched 105.18-21 yen against 105.60-70 yen in New York and 103.71-74 yen in Tokyo at 5 p.m. Tuesday.
It moved between 105.15 yen and 106.71 yen during the day, trading most frequently at 106.20 yen.
The euro traded at $1.4228-4231 and 149.68-72 yen versus $1.4126-4136 and 149.40-50 yen in New York and $1.4239-4242 and 147.70-74 yen in Tokyo late Tuesday.
Investors bought the dollar in early morning trading on speculation the U.S. government would save AIG, and the currency remained firm after the Fed announced during the morning Tokyo trading that it authorized the Federal Reserve Bank of New York to lend AIG up to $85 billion.
However, the dollar-buying momentum apparently lost steam in late afternoon trading in Tokyo, with the currency retreating to the lower 105 yen range, dealers said.
Many currency market watchers remain skeptical about the strength of the dollar.
"Given recent grim U.S. economic data such as employment, the dollar is expected to face selling pressure from now," said Osamu Takashima, chief analyst of the global market sales and trading division at the Bank of Tokyo-Mitsubishi UFJ.
On the failure of U.S. brokerage house Lehman Brothers Holdings Inc. and the bailout of AIG, the currency market has experienced a swing recently, with the dollar-yen exchange rate moving by a margin of about 3 yen from Tuesday to Wednesday.
Looking at exchange rates with a time span of two weeks or so, a recent swing in the currency market should be considered as "noise" during the process of further weakening of the currency, Takashima said.
But some currency market analysts said the Fed's move worked to prevent the dollar from falling further against other major currencies.
"If the Fed had not acted to save AIG, it could have triggered a further credit crunch," said Takahide Nagasaki, chief foreign exchange strategist at Daiwa Securities SMBC Co.
"Although the currency market is expected to continue to fluctuate for a while, the dollar is unlikely to go into a free fall as it did in March as the environment has significantly changed," Nagasaki said, citing that the eurozone economy is now also worsening.
The dollar slightly lost ground against the euro in Tokyo trading.
Copyright ? 2008 Kyodo News International, Inc.
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