Tuesday November 9, 2004 - 10:58:43 GMT
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INVESTICA Ltd - www.investica.co.uk
Asian policies remain vital
There will be further speculation over medium-term dollar losses, especially with continuing pressure for regional currency realignments and appreciation against the US currency. Defence of options positions will tend to deter near-term market attacks on the 105.0 level. The overall risks still suggest that the yen will eventually strengthen through the 105.0 level with near-term corrections struggling to extend beyond the 106.2.
The dollar failed to push above the 105.8 level against the yen and was stuck close to the 105.5 level in New York with little change in early Europe. Finance Minister Tanigaki repeated his warning that the Finance Ministry would take action if the markets deviated from fundamentals and there will be market caution as the yen approaches the 105.0 level.
There will be further speculation that China will allow the yuan greater freedom and this would put upward pressure on Asian currencies. There is, however, the fact that individual countries will be in stronger competitive position if they resist the trend towards stronger Asian currencies. There is, therefore, the risk that no country will be willing to allow currency strength. If this is the case, there is still the possibility that heavy Asian intervention to stem dollar gains will continue.
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