Thursday June 16, 2005 - 09:57:59 GMT
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INVESTICA Ltd - www.investica.co.uk
Dollar hits resistance
The dollar was unable to make a move back above 109.65 during Wednesday and the dollar weakened back to 109.15 in New York on Wednesday before a small recovery in early Europe on Thursday. There was further evidence of dollar selling by Japanese funds close to the 109.7 level and resistance here is likely to remain tough.
The government upgraded its assessment of the economy for the first time this year which will boost confidence in the economy. The machinery orders data was also stronger than expected with a the core decline lower than expected at -1.0% compared with expectations of a 2.0% decline. Greater confidence over the Japanese economy will have a more significant impact if confidence in the US economy falters. The US data will probably need to be significantly worse before this happens, but caution is required as sentiment could turn very rapidly.
The Bank of Japan also reported that two of the nine-member board voted for a tightening of policy at the latest meeting. A near-term policy shift is still unlikely, but this will reinforce speculation that bank will edge closer to a monetary tightening within the next few months and this will offer some yen support. In the short term, there will still be some yen selling interest on a switch into high-yield currencies.
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