Mon Jul 19, 2004
By Chikako Mogi

TOKYO (Reuters) - The dollar edged up against major currencies on Tuesday but traders said its movements would be muted ahead of a speech by U.S. Federal Reserve Chairman Alan Greenspan later in the day.

Greenspan is due to deliver his semi-annual monetary report to the U.S. Congress on Tuesday and Wednesday, with the market looking for clues over the future course of U.S. interest rates.

Traders said they don't expect Greenspan to alter the Fed's policy of a "measured" rate rise after recent uninspiring data including Friday's weaker-than-expected core inflation numbers, which followed disappointing retail sales and industrial output.

"We are looking at Greenspan's speech to provide a direction to the market," said Naomi Fink, senior currency analyst at BNP Paribas.

"I don't think the Fed has any new material to alter its perception (on rates)," she added.

At 8:15 p.m. EDT, the dollar bought 108.40 yen, up from around 108.25 in late New York trade.

The euro was at $1.2430 versus around $1.2444.

The dollar posted modest gains against the euro as traders continued to take profits after the single currency's recent rally.

The euro rose to $1.2461 on Monday, its highest mark since March 1.

Since the Fed raised interest rates by 25 basis points last month from a 46-year low of 1 percent, the central bank has repeatedly signaled that any future increases would be gradual.

The market has taken this to mean a succession of 25-basis-point rises.

JP Morgan Chase said in a research note that Greenspan's comments would not likely alter the dollar's downtrend.
"The testimony will likely be neutral to slightly hawkish but any boost to the dollar should be short-lived, given that the speech will not alter perceptions of fundamental trends in the U.S. which have depressed the dollar and yields in recent weeks," JP Morgan said.

"Greenspan is likely to underscore a message of 'patience within limits' with a revision down in the FOMC's 2004 growth forecast and a revision up in the Fed's inflation forecast," the report said.

The economic calendars in Japan and the United States are light this week but some traders said they will keep an eye on a key German investor survey due later in the day to gauge the recovery strength in Germany.

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