*Last Updated February 24, 2006, 12:18 am

Daily report by CMC Markets

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FOREX ANALYSIS

BoJ rates in focus once again; drop in Japanese consumer demand fails to derail Yen rally

February 24th - The Yen has continued to post gains against the dollar in overnight trade as speculation over exactly when the Bank of Japan will start to hike interest rates continues to build. This has come despite news that Japanese department store sales dropped for the first time in five months last night – news that will clearly keep the CPI reading under pressure – although consensus appears to be that this news is seasonal and heavy snowfalls have simply kept many consumers at home. Quite how sustainable the rally will be without further directional information is clearly open to debate – any weakness in this afternoon’s US durable goods orders data may leave the Yen to appreciate further whilst from a technical perspective many will be eyeing the 116.40 which is being tested right now. This marks a 50% retracement of the mid-January to early February rally by the dollar and any sustained move below this level will doubtless be seen by some as an opportunity to further extend existing long Yen positions. After the weekend break, Japanese industrial production and retail trade figures due later on Monday can expect to be watched closely as again these could offer an indication as to whether the inflationary pressures that will precipitate a rate hike are starting to emerge but in the meantime a run past 116.40 is likely to be the centre of much attention…

Paul Jackson and Enis Mehmet



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