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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: fswep who wrote (3486)	3/15/2001 10:52:46 PM
From: John Pitera	Respond to of 33421

The USD is plenty strong in my opinion, I see not chance of there not being a rate cut next week, but suprises always happen in life, so I could be wrong. The euro is even back under .90, the Yen of course is weak, the AUD is at an all time low. some end of day currency commentary ----------------- -----------The dollar put in a strong session, as market concerns about growth prospects in Europe and short-term fund positioning triggered selling in the euro. Euro fell below US$0.90 and remains nervous in late NY trade. Japanese yen was weak throughout the session. US stocks were skittish today but did manage to firm amid falling interest rates. There was talk today of Fed cutting rates 75-100bps at next week's FOMC meeting. Trade was active. Japanese policy measures remain a primary focus of attention and overnight the focus was on building speculation that the BoJ is prepared to take further steps towards easing monetary conditions at its next policy board meeting on March 19. Market speculation includes return to ZIRP (Hayami still views ZIRP as "abnormal" but further rate cuts can't be ruled out) and some type of monetary target such as a "reserve target" where BoJ would target deposit balances at banks. Given the current economic conditions an inflation target is not expected at this time. The BoJ moves are seen to be considered in the context of government measures that will also help the economy perform better including steps to help banks write off bad loans (ie creating a private fund to purchase shares sold by banks in their clean up process). Prospects of Japanese banks writing down the bad debt helped Japanese stock prices bounce overnight. Moody's left their outlook for 16 major Japanese banks as stable, good news after Fitch's announcement putting the banks on watch for possible downgrade. More aggressive ease by Japanese authorities is seen to be consistent with a dollar rise to the JPY125-130/US$ region in the months ahead. Option related activity in the JPY121-122/US$ region seen to be key today. The rumor mill is active with talk today that MoF official Kuroda is on his way to Washington to present the latest set of Japanese policy plans and that US officials would have no problem with a weaker yen. On the Japanese data front Japanese industrial production was downwardly revised to -4.2%MM in January from a previous estimate of -3.9%MM. The drop was the largest monthly decline in IP in 20 years. Where does the yen go from here? Negative market focus on Japan dominating market sentiment and yen action right now, but fiscal year end yen demand, balance sheet strengthening yen demand, should not dissipate completely. Market has broken above JPY122/US$ and below .8300 region basis June JY but we'd be cautious about building fresh short yen positions at these levels. Talking of scope for a yen bounce isn't very popular but we'll throw out some numbers just the same given that we still don't want to rule out some short-term balance sheet positioning in favor of JPY. JPY116.50-117.50/US$ cash or about .8615-.8700 basis June JY. I know this looks insane now, but we wouldn't want to rule it out. Further out yen prospects do look defensive, and note our economists continue to look for the yen to weaken to JPY125-130/US$ region in the months ahead (equivalent of .78-.81 basis June JY). -------------