December 28th - A mixed bag of economic data from Japan over the last couple of days – including rising unemployment and consumer prices – has failed to provide the Yen with the support many had been looking for. As a result, the greenback has continued to appreciate against the JPY in recent days, posting further gains from the pre-Christmas move as low as 115.50.
However, the fact that there’s evidence here suggesting that the run of deflation may be coming to a close does stand to provide some support in the longer term as such a move will also likely precipitate the eventual tightening of monetary policy at some time in the future. US data due during the coming short trading week may also provide some direction for USD/JPY, most notably this afternoon’s consumer confidence figure for December. Although there is speculation that US rate hikes could come to a close in the not too distant future, any jump too far past the 100 mark in this reading could result in this view being revised and the dollar finding further support as a result. It is also worth noting however that year end position keeping is likely to be seen in the coming days, ensuring that the lack of data doesn’t necessarily equate to a corresponding lack of momentum as we approach the closing sessions of 2005…
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