Wednesday December 15, 2004 - 10:56:27 GMT
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INVESTICA Ltd - www.investica.co.uk
Japan fears ease slightly
The tankan index will alleviate concerns over the Japanese economy to some extent, although markets will still want hard evidence of an actual improvement rather than just sentiment and intentions. Nevertheless, the US currency is likely to hit tough resistance above the 105.0 level. There will be a reluctance to push the dollar below the 104.0 level in the short term unless the US data is extremely weak. The yen offers good medium-term value against the Euro at 140.0.
The dollar pushed above the 105.0 level during Europe on Tuesday and strengthened to a high of 105.8. The yen was undermined in part by selling against the Euro as the Euro pushed above the 140.0 level, with the yen undermined by option-related selling. The yen did, however, recover in Asia on Wednesday and the yen remained stronger in Europe with a move back below the 105.0 level.
The headline tankan index was in line with expectations, recording a decline to 22 in December from 26 in September. There were, however, fears that the data could be even worse and there was, therefore, some relief over the figure. The underlying data was also stronger than expected. There was increased confidence in the smaller and non-manufacturing companies while there was also an upgrade to large-company capital spending levels. The tankan data should ease fears over the economy slightly, but markets will want stronger production and spending figures to change their expectations more decisively.
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