Thursday June 24, 2004 - 09:43:01 GMT
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INVESTICA Ltd - www.investica.co.uk
Yen optimism sustained
Underlying confidence in the yen should remain intact due to optimism over the economy and expectations of further capital inflows. The break of dollar support in the 108.00/20 level will encourage further short-term dollar selling. There is also the potential for medium-term gains, but some caution is needed as the dollar is likely to attempt at least a temporary correction from 107.5.
The yen was subjected to further upward pressure in Asia on Thursday and the yen pushed to a high of 107.7 as dollar support at the 108.0 level was broken.
The economic data has remained strong with the all-industries index rising 2.3% in April. There is optimism over the Tankan index to be released on July 1 with speculation that it will report the strongest headline reading since 1991. There is also optimism that the forthcoming consumer price report will not show an annual decline for the first time in five years.
The latest capital account figures reported inflows into the Japanese market of US$2.25bn in the latest week and there are likely to be further near-term inflows. The Nikkei index rose by 1.4% to an 8-week high and the Nikkei gains will reinforce optimism over near-term yen appreciation.
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