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

To: Diana who wrote (3879)	5/21/2001 4:21:57 PM
From: John Pitera	Respond to of 33421

I think the Chinese would win that battle if it occurs....here is some Japanese Yen analysis from today ---------------- Japanese Yen JPY softening today. We think it can soften further toward JPY125/US$ or .8050 basis June JY ahead. On the news front, BoJ left its policy unchanged today but did announce a series of measures to improve efficiency of its money market operations including 1) Extending the maturity date for bills purchased in Bill Purchasing Operations from 3 months or less to 6 months or less 2) Increasing the number of eligible counterparties in Bill Purchasing Operations from 30 to 40 3) Using smaller units for bid rates in competitive yield auctions from .01% to .001% from July of this year and 4) Expanding the range of Japanese government bonds in outright purchases of JGBs from 10 and 20-yr bond to also consider 2, 4, 5 and 6 year bonds beginning in June. The steps are seen as a sign that further BoJ ease will probably come down the road and seen as a force that should keep some selling pressure on the yen. For now Yen remains in a JPY120-125/US$ range (.8050-0.8380 basis June JY) with near term bias toward a test of support. We missed the boat on selling yen at the recent highs in the JPY120.50-121.70/US$ region (.8245-0.8330 basis June JY) technicals at that time were flashing warning lights that we were concerned about going against. Nonetheless our bias to sell in anticipation of a move to JPY125 or .8000-0.8050 basis June JY region remains intact. Key to softer yen performance in our view, waning foreign demand for Japanese stocks (a recent plus for JPY) as clouds gather over policy backdrop in Japan and possible fresh Japanese demand for foreign assets in new fiscal year. Japanese policymakers are on an encouraging course but a lot of the good news of a willingness for change has been priced in and now the market will shift its attention (and concerns) to the implementation process where risks seem to favor a potentially defensive yen. 1)Policy efforts do progress to real structural reform where short term economic pain will give way to longer term positive growth environment but short term pain could weigh on JPY and/or 2)policy efforts towards reform fail or run into troublesalso a mild yen negative. We aren't looking for a substantial yen deterioration looking for the yen's downside to be curtailed by support from Japan's still sizable trade surplus position and improved domestic and foreign demand for Japanese assets in the "new" policy environment. Versus the European currencies we view the recent euro decline against the yen with skepticism just as we view the euro weakness against the dollar at this time. Near term look for euro-yen support around JPY106-JPY107/euro. We continue to look for the euro-yen cross to move back toward JPY115/euro ahead.