Friday December 24, 2004 - 16:02:38 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (24 December 2004)
The euro established a fresh lifetime high vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3550 level in thin holiday trading. The pair didn’t get lower than $1.3485 overnight as die-hard traders kept their sights on the psychologically-important $1.3500 figure. Traders cited renewed concerns about the U.S.’s appreciable current account and budget deficits overnight. One impetus for the stronger euro was a comment from Dutch finance minister Zalm who said the euro continues to trade “within an acceptable range.” This contrasts starkly with a comment from French finance minister Gaymard yesterday wherein he said the dollar’s fall could become “catastrophic” and suggested concerted intervention may be required. These conflicting comments suggest there is still disparity amongst eurozone officials about how to handle the euro. The French are clearly dissatisfied with these relatively lofty levels while other countries continue to overlook the moves. Euro bids are seen around the US$ 1.3470 level.
The yen was confined to a narrow range vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥103.80 level and was supported around the ¥103.45 level. Liquidity was extremely thin as most players were absent of account of the Christmas holiday. Data released in Japan overnight saw nationwide department store sales fall 5.1% y/y in November to ¥670.7 billion, the twelfth decline in thirteen months. Also, supermarket store sales fell 4.8% y/y, also the twelfth decline in thirteen months. These data follow recent economic data that suggest Japan’s economy is probably slowing. Earlier in December, GDP data were released that showed Japan narrowly averted a recession. Japan’s cabinet today adopted an ¥82.18 trillion budget for the year through March 2006, a slight increase in the ¥82.11 trillion budget for the current fiscal year. The Nikkei 225 stock index climbed an impressive 1.39% to close at ¥11,365.48 – the first time it has closed above the ¥11,300 figure since 13 October. Dollar offers are seen around the ¥104.20 level. The euro retained some strength vis-à-vis the yen today as the single currency tested offers around the ¥140.35 level and was supported around the ¥139.85 level. Traders are curious to see if the pair can sustain the ¥140.00 figure.
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