Monday September 20, 2004 - 10:07:31 GMT
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INVESTICA Ltd - www.investica.co.uk
Dollar still faces yen resistance
There will be doubts over the Japanese growth outlook, especially with a fresh rise in oil prices. There will also be speculation that Japan will curb any yen gains which will curb buying interest with the potential for tough resistance around 109.0. The wider regional exchange rate pressures are still likely to support the yen. Exporter selling is also likely to resume on Tuesday and the dollar is still likely to hit further selling pressure above the 110.2 level.
The dollar and yen have remained trapped within familiar ranges. The US currency has continued to look uncomfortable above the 110.0 level and it retreated to 109.75 in early Europe on Monday. The Japanese market was closed on Monday and this is likely to create exporter dollar selling above the 110.0 level on Tuesday when commercial players return to the market.
There will be speculation that the Bank of Japan will act to curb yen appreciation through dollar buying especially with uncertainties over near-term domestic growth. The overall regional pressures will, however, be favourable for the Japanese currency with speculation that the Chinese yuan will be allowed to strengthen. This is likely to create regional capital inflows which will help support the yen. It is also very unlikely that there will be Bank of Japan intervention ahead of a G7 meeting at the end of September.
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