Dollar in tight band against yen

TOKYO: The dollar was stuck in a tight band against the yen in Asia on Wednesday, with China's latest rate hike providing little surprise to the market, dealers said.

The US unit fetched 82.33 yen in Tokyo morning trading, slightly up from 82.31 yen in New York late Tuesday.

The euro firmed to $1.3640 from $1.3621, and rose to 112.28 yen from 112.20 yen.

Market reaction was muted after Beijing on Tuesday hiked interest rates for the third time in four months as policymakers struggle to tame inflation and property prices.

The People's Bank of China said it would raise the one-year deposit and lending rates by 25 basis points each, taking them to 3.0 percent and 6.06 percent respectively.

In October, the bank raised rates for the first time in nearly three years to restrain a flood of liquidity that has been fanning inflation and hiking property prices. They raised them again on Christmas Day.

"China's rate hike gave little surprise to the market as such a move around the Lunar New Year holiday had been widely expected," said Gen Kawabe, dealer at Chuo Mitsui Trust and Banking.

The increase was "unlikely to have an adverse influence on the Chinese economy," Yuichiro Harada, senior dealer at Mizuho Corporate Bank told Dow Jones Newswires.

"The market is looking at rate hikes as a sound process to curb inflation. The global economic recovery is likely to continue."

The Chinese stock market, which reopened Wednesday following the week-long holiday, suffered a setback in early trade but soon rebounded and was flat by mid-morning.

Forex dealers are now awaiting congressional testimony by Federal Reserve chairman Ben Bernanke later in the day amid growing optimism about the global economy, dealers said.

"As US economic indicators released recently have been positive, market participants are watching whether Bernanke would give any hint at the course of monetary policy to follow the current quantitative easing phase," Kawabe said.