*Last Updated December 2, 2005, 12:41 am

Daily report by CMC Markets

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FOREX ANALYSIS

USD JPY breaks through 120, 0% interest rates set to remain at BoJ

December 2nd – The Yen has broken through the key 120 level against the dollar for the first time since August 2003 with the ECB rate hike yesterday apparently highlighting the continued absence of any yield on JPY deposits. Furthermore, estimations as to when the Bank of Japan may be able to look at tightening monetary policy do seem to be slipping and earlier suggestions that interest rates would rise in April of next year are now being revised by many in the market. Oil prices are certainly showing no real signs of retreating away from the $57-$59 a barrel range and this is going to continue to hamper growth in Japan as we move into the New Year. The US non-farm payroll figures may provide further downside for the Yen later in today’s session, especially if there’s no real signs of a slow down in the economy. Income and expenditure data released yesterday normalised after an errant few months in the wake of the damaging hurricanes, but obviously any suggestion that wage inflation is poised to take off will leave the market with further commitment to the dollar given the Fed may end up obliged to continue hiking rates steadily until well into 2006.

Wayne Roworth and Enis Mehmet



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