18 January 2001, 15:35  US FX Daily Outlook: Dlr/yen hits fresh 18-mo high, then falls

By James Thornhill, BridgeNews
New York--Jan. 18--Dollar/yen hit another 18-month high of 119.90 overnight amid heavy option-related buying, but was sold aggressively ahead of the key 120.00 handle by investment banks. Bank of Japan governor Masaru Hayami said the yen weakness was temporary. Euro/dollar found good support from a dollar/Swiss franc sell off, but held inside Wednesday's range of 92.88-94.50 cents.
* * * Dollar/Swiss franc hit a three-day low of 1.6185 on hawkish comments from Swiss National Bank president Jean-Pierre Roth and worries over Nestle's $10.3 billion bid to buy U.S.'s Ralston Purina.
Sterling fell a touch against the euro and dollar on the back of a disappointing 0.1% monthly rise in U.K December retail sales.
Meanwhile, dollar/Canada traded a narrow 1.5091-1.5122, showing little immediate reaction to Canadian December inflation data at the top end of market forecasts (up 0.1% on the month, up 3.2% on the year).
U.S. traders have again missed the boat on USD/JPY's latest move up and that pair could see further consolidation in U.S. trade today. The 120.00 level is likely to be a tough nut to crack amid talk of weighty option plays there.
U.S. December housing starts (0830 ET) and the Philly Fed's January business outlook (1000 ET) top the data agenda, while Fed governor Edward Gramlich (1445 ET) and St. Louis Fed president William Poole (1800 ET) are on the speaking schedule.

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