Tuesday November 30, 2004 - 11:09:13 GMT
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INVESTICA Ltd - www.investica.co.uk
Long-term dollar selling
The yen will be restrained in the very short term by disappointing Japanese economic data, pressure for a covering of short dollar positions and reduced speculation over a yuan revaluation. There is, therefore, scope for a further dollar correction stronger, but substantial buying interest is unlikely. The underlying pressures still look to be for a stronger yen and the US currency will struggle to push beyond 103.8 before a fresh attack on 102.5.
The dollar found support at the 102.5 level against the yen, but it is struggling to make any progress significantly above the 103.0 level and was close to 103.1 in early Europe on Tuesday. There have been media reports that the Bank of Japan will intervene at levels around 102.0 and this will discourage aggressive dollar selling in the very short term.
The Japanese economic data was disappointing with a 1.6% industrial production decline for October compared with expectations of a marginal increase, while the unemployment rate edged up to 4.7% from 4.6%. The disappointing data will curb the potential for near-term yen gains.
The latest IMM data recorded a decline in long yen positions of over 10,000 in the latest week, cutting the long position to around 33,000. There will still be pressure for a covering of short dollar positions, but positioning is slightly less extreme.
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