Yen consolidates recent gains on dollar; further directional data awaited.
December 13th - Some bullish economic data out of Japan overnight showing the third consecutive expansion of the country’s capacity utilization and industrial production has consolidated yesterday’s gains for the Yen, pushing USD JPY back below the 120 line to levels that haven’t been sustained since the end of last month. Whether or not this move holds in the longer term may well depend on US data due for release later in the session, with retail sales and the FOMC rate verdict both being expected. The market has already factored in a 25 basis point hike for US interest rates, but it’s going to be a case of looking to see just how hawkish the accompanying sentiment is – consensus is mounting that the run of rate hikes will abate in the early part of 2006, but should today’s statement differ from this then look for renewed dollar buying later in the session. Mounting oil prices can also be expected to weigh on the Yen in due course – Japanese industry has without doubt been benefiting from cheaper crude, but once again we’re trading past the $60 level and with the recent spell of cold weather in the US, demand looks set to remain high. As always, tomorrow’s inventory data will provide further direction here, but at present it’s difficult to see on which side of 120 USD JPY will finish the year…
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