18 April 2001, 12:10 Forex: Yen well bid in early London trade amid talk of new pro-reform leader
LONDON (AFX) - The yen was well bid in early trade amid talk that
pro-reformist Junichiro Koizumi could well become Japan's next prime
minister.
Statements to the effect that Japan is not going for a competitive
depreciation of its currency given the trouble this may cause its Asian
neighbours also helped the yen, Halifax economist, Steven Pearson said.
West LB economist, Michael Klawitter agreed saying that the rally
on the Nikkei and an increased likelihood that the reformer Kouzimi
will become Japan's next prime minister boosted the yen.
"Some more yen short positions were unwound and dollar-yen declined
to the lowest level since the end of March, leaving the risk for
further declines towards the 122 area," he added.
The euro remained hovering at the 0.88 usd level with the European
Central Bank decision to hold off a rate cut still keeping the single
currency under pressure.
The market is now rewarding rate cuts, this is evident from the
Canadian dollar's rise after its central bank lowered interest rates,
Pearson at Halifax said.
"The euro's broad based weakness against sterling and yen supports
this view and clearly leaves the risk in our euro-dollar forecast to
the downside," West LB's Klawitter said.
In fact positive economic news, such as the morning's French
industrial output data, have been mild setbacks for the euro, Pearson
added.
Turning to the dollar, today's release of U.S. Feb trade data
should confirm that the 2001 U.S. current account deficit is well on
track for a record high.
But this should leave investors little concerned given that
foreign demand for U.S. corporate bonds alone is already financing 75
pct of the current account deficit, Klawitter said.
Elsewhere, sterling was little changed.
"As long as the Bank of England's minutes will show that the last
rate cut was a unanimous decision, sterling should be little affected
given the widely accepted view that the BoE will keep its pro active
stance," Klawitter added.
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