Thursday July 1, 2004 - 09:30:46 GMT
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INVESTICA Ltd - www.investica.co.uk
Tankan supports yen
The stronger than expected Tankan report will revive confidence in the Japanese economy and there is the potential for further capital inflows. It will still be difficult to see strong yen gains with caution ahead of the US employment figures tomorrow. Overall, the yen is likely to be blocked at 107.5 for now despite the medium-term potential of a move to 106.5.
The dollar briefly pushed above the 109.0 level against the yen, but the yen strengthened in Asia, notably after the Tankan report and the yen pushed to a high of 107.7 before retreating back to 108.2.
The headline Tankan index was stronger than expected with an increase to 22 in June from 12 in March, while the index for the non-manufacturing sector also met expectations. The figure will sustain optimism over the Japanese economy and there is the potential for further capital inflows into the equity market after inflows of US$1.5bn over the latest week.
Lower oil prices should help support the yen in the short term, but there is likely to be caution over selling the dollar aggressively below the 108.0 level, especially ahead of the Friday US payroll figures.
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