Thursday May 19, 2005 - 09:53:41 GMT
Share This Story
INVESTICA Ltd - www.investica.co.uk
Asian currency policies will remain in focus
The dollar failed to sustain a move above 107.5 against the yen and weakened to lows of 106.75 before rebounding to 107.0. The yen will gain some support from lower oil prices and a rally in the Nikkei index. Investment flows will, however, remain negative for the yen with latest figures recording outflows of US$12.1bn into overseas bonds in the latest week. The underlying Japanese balance of payments position will remain strong which will lessen the risk of sharp yen losses.
The US authorities have continued to exert strong pressure on the Chinese authorities to let the yuan strengthen with Treasury Secretary Snow calling for a move to let the yuan appreciate now. The underlying pressures will continue, although there is still the risk that US political pressure will reinforce Chinese resistance.
Regional exchange rate policies will remain a very important focus with the Hong Kong Monetary Authority (HKMA) widening the dollar's trading band. The currency will be allowed to trade in a 7.75-7.85 range against the dollar to help deter speculative inflows and ease downward pressure on interest rates. The Hong Kong move will maintain speculation that the Chinese authorities will also make a move to offer greater yuan flexibility. In this context, the Hong Kong move could be seen as indicating that they are expecting a Chinese move in the near term.
The dollar was unsettled slightly by reports from Korean officials that they would not look to increase reserves further. This will maintain speculation over wider Asian currency gains. The developments over the past two weeks continue to suggest that there will be Asian moves to allow stronger currencies in the medium term and this will tend to weaken the dollar in Asia even if there is near-term resistance to a Chinese move.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."