Wednesday March 2, 2005 - 09:13:46 GMT
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CMC Markets - www.cmcmarkets.com
Prospect of higher rates at the Bank of Japan bolsters JPY
March 2nd - The Yen continues to post incremental gains against the dollar as speculation mounts as to whether the Bank of Japan is now looking for a way to ease itself out of the current phase of ultra-slack monetary policy.
Although explicit comments to counter this scenario were made earlier in the week, itís also clear that the sharp upturn in household spending Ė with an increase of 8.2% from December to January - could ultimately manifest itself as inflationary pressures, especially if growing domestic demand helps bolster the countryís GDP. Industrial production is also up and employment is holding steady at 4.5% so the signals certainly look encouraging and furthermore, bond traders are also buying into the prospect that rates will soon be on the increase. USD JPY has now slipped from a high of 105.50 at the end of last week down towards 104.50 in earlier trade and with little in the way of solid economic data due out of the US today, itís feasible that we will see further Yen appreciation in the near term.
Fridayís non-farm payrolls may offer the greenback some support in due course, but yet again the USD looks to be under pressure.
Chris Callander and Enis Mehmet
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