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Dollar rides wave of optimism

Tokyo - The dollar maintained its strength during Asian trade on Monday, buoyed by optimism about the pace of the US recovery, analysts said.

The greenback bought 102.03 yen, holding on to gains it made at the end of last week, when it stood at 102.06 yen in New York on Friday.

The euro was also little moved, buying $1.3593 and 138.69 yen, against $1.3597 and 138.79 yen in New York.

Dealers were still buoyed by the US Federal Reserve's decision last week decided to keep the nation's ultra low-interest rate policy, while its head indicated they would remain low well into next year.

Once the US economy shows clear signs of recovery, US short-term interest rates will likely gain, giving a boost to the dollar against the yen, said Akira Moroga, manager of the forex products group at Aozora Bank.

Until then, however, “market participants will likely watch each US economic indicator”, such as gross domestic product data to be released on Wednesday, he told Dow Jones Newswires.

Gains on the Nikkei index in Tokyo were also providing support for the dollar.

However, it was unlikely to be all plain sailing for the US unit.

Osamu Takashima, chief FX strategist at Citigroup Global Markets Japan, warned that a weaker yen and higher Japanese stocks are unlikely to continue to coexist.

The current strength of Wall Street shares, high hopes for the upcoming Japanese growth strategy, and expectations for additional monetary easing by the Bank of Japan are likely to recede over time, he said.

He was “increasingly confident” that the dollar would ease toward a support level around 101.60.

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