Dollar Falls To 2-Week Low Vs Yen On Weak US Rates, Japan Stocks

    --Dollar at fresh two-week low vs yen on lower U.S. interest rates, weak Japan shares

    --Sharper-than-expected Japan CPI gains pushed up dollar briefly

    --Dollar outlook depends on results of upcoming U.S. economic data

       By Takashi Mochizuki 

    The dollar fell to a fresh two-week low against the yen Friday in Asia as investors took a cue from falling U.S. Treasury yields to square stocked-up long positions.

    The greenback fell to as low as Y98.68, its lowest level since July 12, as currency traders confirmed declines in U.S. interest rates and Japan's Nikkei Stock Average.

    Earlier in the day, the currency pair was on a rising note--though for a very brief period--after government data suggested the Bank of Japan's efforts to beat deflation might be working.

    Japan's core consumer price index, which excludes fresh food prices, rose 0.4% in June the government said, beating a 0.3% rise forecast by economists.

    "Japan's efforts to achieve inflation are a long-term project, and investors have been paying more attention to the U.S. economic outlook anyway," said Masaru Ishibashi, head of the FX trading group at Sumitomo Mitsui Banking Corp.

    As of 0450 GMT, the dollar was at Y98.92, down from Y99.28 in New York on Thursday.

    Traders say the dollar isn't likely to make any sharp, one-way moves for the time being because much of the market focus is on U.S. economic indicators, which could change the course of the currency each time they are released, depending on their outcomes.

    Still, some traders were cautions about the dollar falling slightly more, if an important technical level is broken.

    "Technically, a range around Y98.70-Y98.80 is key, and a clear break of that line could knock the dollar down to the low Y98.00 level," said Osao Iizuka, head of FX trading at Sumitomo Mitsui Trust Bank.

    The Wall Street Journal Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at about 73.895 from 74.054.

    The euro was at $1.3276 and Y131.34 from $1.3278 and Y131.74.

    Interbank Foreign Exchange Rates At 00:50 EST / 0450 GMT 
                             Latest     Previous   %Chg   Daily   Daily    %Chg 
                                        2150 GMT          High    Low      12/31 
    Dollar Rates 
    USD/JPY Japan            98.90-92       99.27-31  -0.38    99.40    98.70 +14.02 
    EUR/USD Euro            1.3276-78      1.3276-79   0.00   1.3288   1.3270  +0.62 
    GBP/USD U.K.            1.5386-90      1.5388-93  -0.02   1.5405   1.5374  -5.28 
    USD/CHF Switzerland     0.9292-96     0.9296-301  -0.05   0.9305   0.9286  +1.55 
    USD/CAD Canada          1.0275-78      1.0277-82  -0.03   1.0288   1.0272  +3.52 
    AUD/USD Australia       0.9261-64      0.9243-46  +0.19   0.9275   0.9232 -10.88 
    NZD/USD New Zealand     0.8079-84      0.8077-84  +0.01   0.8096   0.8056  -2.37 
    Euro Rate 
    EUR/JPY Japan           131.28-32      131.80-85  -0.40   131.98   131.10 +14.72 
    Source: ICAP PLC 

    Write to Takashi Mochizuki at