No respite for RP 5, leaves for SEABA

TOKYO (AFP) - The dollar hit a fresh three-month high against the yen in Asian trade Wednesday as optimism about the outlook for the US economy grew in the wake of recent robust data, dealers said.

The dollar reached 121.66 yen in Tokyo morning trade, a level last seen in February, up from 121.55 in New York late Tuesday.

The euro was steady at 1.3449 dollars from 1.3447 while firming to 163.59 yen from 163.47.

"Traders are buying back the dollar as they continue to digest a series of robust economic indicators released last week," said Masaki Fukui, senior market economist at Mizuho Corporate Bank.

Sentiment on the US economy has brightened following better-than-expected jobless claims, a surprise rebound in new home construction and an unexpected strong rise in industrial production.

Market players were waiting for April existing home sales due this Friday while watching Wall Street's strong performance to gauge the outlook, Fukui added.

Hawkish comments from Federal Reserve Bank of Richmond president Jeffrey Lacker fanned doubts about whether the US central bank will cut interest rates this year, dealers said.

Lacker, who has a reputation as a tough inflation fighter, said in an interview with CNBC that holding the Federal Funds rate at the current level for the next two years would probably not be enough to bring lower inflation.

Lacker dissented several times last year with the Fed's decision to hold rates steady, arguing for the need to raise rates again to control inflation. He is not a member of the rate-setting board this year.

"Although a non-voting member, Lacker's comments added to expectations that the Fed was not likely to cut interest rates this year," National Australia Bank strategist John Kyriakopoulos wrote in a note to clients.

Players were paying close attention to the "strategic economic dialogue" in Washington with US Treasury Secretary Henry Paulson and Chinese Vice Premier Wu Yi.

But dealers said the talks were unlikely to have much impact on markets, coming so soon after China's latest widening of the yuan trading band.

"China has already made a move before the talks so we don't expect (the discussions) to affect markets," Mizuho's Fukui said.