Thursday July 22, 2004 - 09:53:57 GMT
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INVESTICA Ltd - www.investica.co.uk
Exporter selling supports yen
The more optimistic US currency sentiment will underpin the dollar in the short term. The yen will, however, be protected by the lack of long speculative positions in the currency and there will also be persistent exporter selling at the 110.0 level. Overall, the yen should find good support at the 110.0 level, although any gains are likely to be capped around 108.2 for now.
The dollar briefly strengthened to a high above 110.0 against the yen with a peak at 110.3, but it retreated back to 109.6 in early Europe on Thursday. There was evidence of exporter selling at the 110.0 level and there is the probability of further commercial selling at this level.
The Nikkei index fell 1.3% on Thursday due to technology concerns, but the decline could have been worse given the Nasdaq fall and this suggests that overseas selling may have been limited.
The trade surplus for June was slightly below market expectations at JPY1.15trn. Export growth was, however, still strong and the lower trade surplus was the result of stronger import demand. Given that this signals stronger domestic demand and a Japanese recovery, the implications should be favourable for the yen.
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