*Last Updated February 9, 2006, 12:25 am

Daily report by CMC Markets

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FOREX ANALYSIS

Dollar regains lost ground as BoJ elect to keep rates on hold

February 9th - The Yen has weakened overnight against the dollar as traders reacted to news that the Bank of Japan would keep interest rates unchanged for the time being. There is a move towards dropping the ultra-lax monetary policy with the Bank’s policy committee seeing a 7-2 split vote, but clearly traders expectations were for yields to start improving by now. The next run of Japanese numbers – starting with import and export price indices tonight then followed by trade balance data at the beginning of next week – will be closely watched and assuming that there’s continued evidence that the deflationary run is coming to an end, the Yen may well be able to reverse this latest decline once more. Perhaps more significantly in the short term, tomorrow’s US trade balance data also has the potential to deliver some direction for the dollar. Some analysts are forecasting a slight widening in the trade gap, up from November’s $64.2bn figure but no large increase is forecast. Obviously any surprise here – or alternatively with today’s weekly jobless figures - could have an unsettling effect on the greenback ahead of the weekend break but otherwise another run of consolidation may well continue…

Wayne Roworth and Enis Mehmet



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