Tuesday September 14, 2004 - 10:03:14 GMT
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INVESTICA Ltd - www.investica.co.uk
Forex: Heavy yen selling unlikely
The yen will be undermined to some extent by the Sony bid for MGM. There will also be further doubts over Japanese growth following recent data disappointments. The US dollar will still find it very difficult to take advantage of yen vulnerability and there is likely to be tough dollar resistance close to the 110.3 level. Poor US spending data would put the US currency on the defensive, but immediate dollar support will continue close to the 109.0 level.
The yen was put of the defensive in New York on Monday, weakening to a low of 110.3, but the US currency was again unable to sustain the position above 110.0 and it dipped to 109.75 in early Europe on Tuesday.
The yen was undermined by reports of a US$5.0bn purchase of MGM studios by Japanese company Sony. This will require significant dollar buying and will undermine the yen slightly, but the overall impact should still be relatively small given the overall size of capital flows.
There will be doubts over the Japanese and US growth trends. Until these doubts have been resolved, both currencies will find it difficult to break out of narrow ranges. The US currency will be unsettled if there is a weak US retail sales figure today.
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