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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Knighty Tin who wrote (42182)	12/2/2005 3:26:15 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Dollar Regains Some Momentum After Treasury Denies Comment After Breaking Through 121 Yen, Greenback Falls on Snow Report mataf.net By LAURENCE NORMAN and AZAM AHMED DOW JONES NEWSWIRES December 2, 2005 2:03 p.m. The dollar briefly lifted above 121-yen for the first time since early 2003 and pushed the euro close to a fresh two-year low during highly choppy trading. However, it ceded some of its gains after Reuters reported that Treasury Secretary John Snow said that this weekend's meeting of the Group of Seven industrialized nations will discuss yen weakness. But the Treasury Department denied the report, saying Mr. Snow "had no comment" on the yen. The report still triggered a sharp advance by the yen, taking the Japanese currency to a session high versus the dollar as the U.S. currency sank to 120.19 yen. Earlier in the morning, the dollar had hit a session high of 121.24 yen, its strongest level since March 2003. The euro fell as low as $1.1660, close to last month's two-year low at $1.1640. After Treasury denied the report on Mr. Snow's yen comments, the dollar regained some strength. Recently, the euro was at $1.1707 from $1.1733 late Thursday. The dollar was at 120.62 yen from 120.44 yen and unchanged at 1.3181 Swiss francs. The pound rose to $1.7336 from $1.7306. Earlier, the U.S. reported non-farm payrolls grew by a robust 215,000 in November, sending the dollar higher. But it then sunk to a session low before staging a sharp recovery that took it to fresh multiyear highs. Rafael Martorell, senior foreign exchange trader at BNP Paribas, said the morning choppiness shows a certain degree of confusion about where the next major dollar move against the euro will be. Robert Lynch, senior currency strategist at HSBC in New York, said that the dollar's new highs against the yen came partly because of technical pressure to breach the 121-yen level and also because of the dollar's continued interest-rate advantage, above all against the yen. There is "a weaker bias in the yen because most G10 central banks are [on a] tightening policy and the Japanese are not," Mr. Lynch said. He added that the dollar's upward move gained momentum after investors finally managed to knock out options barriers just below 121 yen. As the dollar lifted against the yen, it also made fresh gains versus the euro, pound and the Swiss franc. On the one hand, the dollar has struggled to hit new highs against the euro this week despite a stream of positive data. However, the euro also seems unable to bust out of the $1.1650-$1.1850 range it has traded in for weeks, even after the European Central Bank decision Thursday to lift rates for the first time in five years. "There's a lot of two-way flow in this market right now," Mr. Lynch said. Adding to the volatility, there was some additional dollar selling after payrolls and before a speech by Fed Chairman Alan Greenspan on the budget, as investors feared he might have issued stern warnings about the U.S. budget deficit. However, when Mr. Greenspan used the speech to say that the U.S. economy is expanding at a "reasonably good pace," it helped the dollar recover from its losses. Attention also is on the weekend's G7 conference in London, where foreign exchange issues are under discussion. The dollar's sharp climb against the yen continued Friday after Japanese Finance Minister Sadakazu Tanigaki said the dollar/yen exchange rate at the moment is a fair reflection of the state of the two nations' underlying economies. After the dollar topped 120 yen Thursday for the first time in more than two years, Mr. Tanigaki told reporters: "We usually don't comment on specific levels, but it's appropriate for me to say that current dollar/yen moves are mostly in line with economic fundamentals." The dollar has gained more than 10% in the last three months against the yen, causing some speculation that the Bank of Japan may want to step in to prevent further yen weakness. But Mr. Tanigaki's comments signal such a move is unlikely. Speaking in London, Mr. Snow said that the Bush administration is still not satisfied with the value of the yuan. An official with a European delegation said Friday that G7 Finance ministers and central bank governors may change their statement on China's foreign-exchange regime in a statement to be issued at the end of their weekend meeting Saturday. The official said, however, that it isn't yet clear whether the change in language will be designed to place more pressure on the Chinese government to free the yuan or acknowledge the government's commitment to altering the currency regime.