Japanese Preview

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Interest Rates US: Japan: Eurozone: UK: Switzerland: 1.75% 0.15% 3.=
25% 4.0% 1.25-2.25% [IMAGE] =09 [IMAGE] Japanese Forex Trading =
Preview January 23, 7:00 PM: EUR/$..0.8777 $/JPY..134.47 GBP/$..1.4245 $/C=
HF..1.6695 Japanese Forex Trading Preview by Darko Pavlovic At 6:50 PM J=
apan Dec customs cleared surplus (exp n/f, prev n/a) USD/JPY is trading ar=
ound 134.45 near its fresh three-year highs of 134.63 after Japanese and US=
officials did not strongly object to weak yen, prompting market expectatio=
ns that Tokyo plans to use weak currency to boost exports and bring the eco=
nomy out of current slump. Traders look to break important psychological re=
sistance at 135 yen but wary of possible comments from Fed Chairman Greensp=
an tomorrow.US Treasury Secretary O'Neill's comments overnight that only st=
ructural reforms, and not currency depreciation, would solve the Japanese b=
anking quandary and increase productivity send the yen to a three year lows=
. O'Neill added that he does not believe Japan was deliberately weakening t=
he yen. Nonetheless, analysts interpreted his comments to mean that the US =
would be tolerant of a weaker yen. Despite MoF Mizoguchi's denials that nei=
ther O'Neill or Shiokawa approved of yen weakness in their meeting, investo=
rs sold the yen as Finance Minister Shiokawa, Economics Minister Takenaka a=
nd Prime Minister Koizumi all reiterated that FX rates should be determined=
by markets. In addition, the MoF's Kuroda stressed that Japan did not inte=
nd to drive the yen down, though he suggested that a weak yen, which is ref=
lective of Japan's poor economy, could help the situation. Kuroda also brus=
hed aside concerns from Japan's Asian neighbors that the yen's depreciation=
would negatively impact their economies because they have more flexible ex=
change rate policies and stronger foreign reserve positions following the 1=
997-1998 Asian financial crisis. Japan's customs cleared trade surplus fell=
18.4% in December from a year earlier, to 667.2 bln yen. Japan's surplus w=
ith the US (its largest trading partner) was down 23.6% y/y to 526.9 bln ye=
n. The trade surplus for the 2001 fell 38.3% from the previous year at 6.61=
15 trln yen, a third consecutive year of decline. Resistance is eyed at 134=
.63, 135.0 and 135.50. Support holds at 133.60, backed by 133.0 and 132.60.=
EUR/USD is trading near its one month lows of 87.80 after European Centr=
al Bank president Duisenberg's testimony before the EU's Economic and Monet=
ary Affairs Committee suggested that a rate cut in the foreseeable future i=
s unlikely. He further noted that the recent decline in confidence may have=
bottomed out. Duisenberg also had the temerity to say that he was uncertai=
n that a US recovery would be quicker than one in the Eurozone, because whi=
le the Federal Reserve cut interest rates faster than the ECB, the US rates=
were higher from the outset. He remarked that monetary policy could impact=
growth in the short-run but not in the long run, and thus reiterated that =
the current level of ECB rates is considered appropriate. Support seen at 8=
7.70 and 87.50-- the 31.8% Fibonacci retracement of the move from 82.25 to =
95.96. Resistance is viewed at 88.90, followed by 89.10-- the 50% Fibonacci=
retracement of the same move, and 89.55. The pound slightly recovered at =
1.4232 after falling to a 1-1/2 month low of 1.4222 against the dollar and=
to a 2-week low of .6213 against the euro, weighed by weak data and commen=
ts from an official indicating her support for euro membership. The UK trad=
e deficit widened to 2.84 bln pounds in November from the previous month's =
deficit of 2.39 bln. Furthermore, the Confederation of British Industry not=
ed in a quarterly survey that manufacturing output was declining at its fas=
test pace in 2-1/2 years and thus called on the Bank of England to enact an=
other rate cut. The pound was hurt after British Trade and Industry Secreta=
ry Patricia Hewitt commented on the benefits of joining the euro, including=
currency stability and cost transparency. Moreover, she expressed the opin=
ion that there is something fundamentally wrong in the current euro/pound e=
xchange rate when highly productive manufacturing plants were struggling to=
export profitably to the Eurozone. Support at 1.4221-- the 61.8% Fibonacci=
retracement of the move from the January 8, 2001 high of 1.5101 to the Jun=
e 12, 2001 low of 1.3680. Next downward target is seen at 1.420 and 1.4160.=
Upside capped at 1.430, 1.4360 and 1.440.a small chance of a rate cut at t=
he Jan 30 meeting, leaving the majority to believe rates will be held stead=
y at a 40-year low of 1.75%. The National Association of Manufacturers tod=
ay praised US Treasury O'Neill in his remarks yesterday when he said that c=
urrency depreciation policies could not:"repair underlying economic proble=
ms such as productivity or non-performing bank loans". NAM described O'Nei=
ll's words as being "right on the money" which were deemed to shed light on=
the 10% fall in the yen of the past 4 weeks. The remarks follow a letter t=
o the Treasury last week citing numerous negative effects of the strong dol=
lar, including loss of business share in global markets, increased layoffs =
of employees, and relocation of plants overseas. Having said that, Secreta=
ry O'Neill still reiterated the US strong dollar policy as a way to avoid a=
ny uncontrollable decline in the US currency should his words to Japan may =
be misunderstood to be intentionally weakening the dollar. Mr Kuroda of Jap=
an's MoF wrote today in the FT that the declining yen reflected the nation'=
s ailing economic situation and did not emanate from deliberate government =
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