Tuesday June 8, 2004 - 09:26:12 GMT
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INVESTICA Ltd - www.investica.co.uk
Limited yen gains realistic
Volatility will continue, but there is the potential for renewed optimism over the Japanese economy and expectations of further gains in the Nikkei index. Overseas selling of Japanese stocks should also remain lower. There is the potential for a yen move to at least 109.2 with tough dollar resistance likely on any rebounds to 110.5. Stronger longer-term yen gains are also realistic.
The yen remained strong during Monday with a push towards 109.5. The yen stalled in early Asia due to a lack of fresh incentives, but remained firm in early Europe at 109.7.
The Nikkei index struggled to make progress for much of the day, but it ended with a 0.72% increase and optimism over the economy will offer some near-term yen support. The money supply and bank lending figures also offered some slight support, although markets will await the first-quarter GDP revisions due tomorrow. The evidence suggests that overseas selling of Japanese stocks has eased which will underpin the yen.
There will still be caution over pushing the yen aggressively stronger, especially as the Bank of Japan could start to signal some unease.
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