Friday August 13, 2004 - 09:52:40 GMT
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INVESTICA Ltd - www.investica.co.uk
GDP figures hurt yen
The yen will be damaged by the weaker than expected growth figures today and high oil prices will also remain a major market concern. There will, however, still be capital flows into Japan and further Wall Street declines could eventually trigger substantial dollar selling. The dollar may try to push higher in the short term, but offers very little value above the 112.0 level on a medium-term view.
The yen was unable to push through 110.5 against the US currency and it weakened back to 111.2 in late New York. The yen weakened further after the weaker than expected Japanese GDP figures with a decline to 112.0.
There was a 0.4% GDP increase for the second quarter compared with expectations of a 1.0% increase. Spending and exports were firm, but there was a surprising drop in business investment. Other evidence suggests that investment has been strong and the GDP figures may, therefore, be revised up. Nevertheless, the yen will still be damaged in the short term due to fears that the economy is slowing.
The yen will also be undermined by high oil prices while the Nikkei index fell by close to 2.5% on Friday. These negative factors will be offset by the impact of US coupon payments into Japan from the US.
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