Monday May 8, 2006 - 10:42:38 GMT
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INVESTICA Ltd - www.investica.co.uk
Treasury stance hurts dollar
The dollar held steady against the yen ahead of the US data on Friday, but weakened sharply after the disappointing US employment data to 112.30. The dollar slide deepened in Asian trading on Monday with the US currency weakening to lows near 111.0.
Overall dollar sentiment has continued to deteriorate with markets testing Asian tolerance for stronger currencies. The yen also gained some support from Bank of Japan Governor Fukui who stated that interest rates nay be increased if there is sustained growth. The attitude of Japanese funds after the long holiday week will be important for near-term dollar prospect with some US currency relief if the lower levels attract buying interest.
The dollar was also damaged by calls for Asian currency appreciation by the US Treasury under secretary Adams and by his opposition to intervention by Asian authorities to stem dollar depreciation. Significantly, there was also no significant opposition to the yen gains from Japanese finance officials on Monday and this will reinforce speculation that there has been at least a limited policy shift, with Asia acting in concert to allow a modest currency realignment. Japanese officials are, however, still liable to intervene verbally if there are sharp yen gains against the dollar from current levels with a particular focus on the 110.0 level.
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