*Last Updated March 17, 2006, 12:01 am

Daily report by CMC Markets

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FOREX ANALYSIS

Yen looking upbeat as US economic data disappoints

March 17th - It’s been something of a difficult week for the dollar with a raft of less-than-impressive US economic data being released over the last few days. This has resulted in mounting speculation – supported by the interest rate futures market – that the Fed will only have one rate hike left as opposed to the earlier suggestion we’d see a move up to 5.25% by the summer. This news has left the greenback under some sustained pressure, not least against the Yen where there’s been a retreat from Monday’s dollar highs around 119.20 right down to 116.70 in recent trade. Data released overnight saw some downward revisions made to the outlook for Japanese economic growth, but critically expansion is still to be expected over the next three to six months so although this may have slowed recent Yen gains, this news does underline the fact that the Bank of Japan will be continuing with its tightening of monetary policy – and therefore improving cash yields – in the medium term. Resurgent oil prices may yet come back to haunt Japanese industry and in turn the Yen in due course but the Yen is certainly moving back into favour and further buying may be expected ahead of the weekend break if Michigan sentiment figures disappoint later in the session too…

Paul Jackson and Enis Mehmet



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