Tuesday June 1, 2004 - 09:31:52 GMT
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INVESTICA Ltd - www.investica.co.uk
Limited dollar correction against yen
The dollar will find it difficult to regain much ground in the short term, especially with a deterioration in underlying sentiment. The dollar is liable to face a further test of 109.0 in the short term and there is the medium-term risk of a move towards 108.0. Nevertheless, aggressive selling below 109.0 offers little value at this stage with a potential correction back towards 110.0 as the dollar is oversold.
Although Japan is a heavy net oil importer, the currency is likely to be supported by the strength of oil prices as global security concerns will tend to undermine the dollar.
The Bank of Japan stayed out of the market in May, but there will be some speculation that Bank will start to become concerned over dollar movements and could consider intervention. There is the possibility that there will be some verbal intervention if the dollar dips to the 108.0 level and this should help restrain near-term dollar selling.
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