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The Bank of Japan intervened today in early US trading in an effort to stem renewed appreciation in its currency. The Japanese central Bank bought dollars for yen near the 123.30 yen level, prompting the greenback towards the 124.30 level before settling just above the 124 figure. Once again, the BoJ intervention proved helpful in lending support to the ailing dollar against the euro, dragging the latter from its 17-month highs against the dollar and from 2 year highs against the pound. Neither the ECB nor the ECB chose to comment on the BoJ's action.
$/JPY retar5celd more than 2/3rds of its post intervention gains touching the 123.70 mark on reports that Pakistani President Musharraf indicated his nation's unwillingness to pull back from the Kashmiri border. While never substantiated, the reports did briefly weigh on the dollar before we saw a rebound in the currency. Yet support remains at 123.80-75 backed by 123.50 near which we could see more intervention. Resistance remains key at 124.50.
BoJ Interventions in 2002 all at the 123 level: The Bank of Japan has intervened today, making this the 4th day of intervention this year to stem excessive appreciation of its currency. The first intervention of the year occurred on May 22 at 1:40 am Eastern time at the 123.60 level. The second intervention took place the next day at 5:20 am at 123.90. Then last week, the BoJ intervened at 2 occasions; once shortly after 2 am at 123, followed by another round at 10 am at 123.75. Today's intervention occurred at 8:40 am at the 123.30s. During these 4 days of intervention, the BoJ stepped in at different levels of the 123 mark.
A string of data releases today pointed to improved sentiment in the Eurozone today. The 12-nation business climate indicator at improved to an 11-month high in May at -0.24 from April's -0.64, while the business sentiment index rose to -9 from -11. The broader economic sentiment indicator edged 1/10th of a point to 99.8 in May. Nationally, French May consumer confidence improved to -12 from -18 in April, the highest reading since December. On the employment front, the Eurozone jobless rate edged up to 8.3% in April from 8.2%. The overall numbers suggest that the Eurozone economy is participating in the global recovery. Recall last week, the strong showing in business sentiment surveys in May from the 3 largest economies; German's Ifo survey rose to 91.5 from 90.5, France's INSEE survey on manufacturing rose to 101 from 98 (above 100 for first time in 11 months) and Italy's Confindustria Survey hit 1.3 after -0.9.
EUR/$ hovers at 94 cents but the pair will attempt to claw back the 94.50 figure. Resistance seen at 94.60, followed by 94.90 and 95.20. Support lifted to 94.20 with follow up support found at 93.70.
Comments from central bankers. At a central banking conference on central banking in Montreal today, the following had to say this on their and the world economy. Fed Chairman Alan Greenspan said the productivity improvement of the past 6 months has shown a fundamental change but the Fed's economic outlook has not changed since January. Regarding the recovery, Greenspan said the US economy would not see a sharp rebound seen in past recessions because the downturn was mild. He added that the economy was going through a "soft spot" but remains on an upswing, albeit not a significant upswing.
BoJ Policy Board member Yamaguchi said the BoJ believes Japan's economic activity as a whole is stabilizing, led by a the exports recovery, adding that corporate profits are likely beginning to improve and domestic demand remains weak. He also said there's a lack of criteria in measuring Japanese reforms effectively and urges patience on assessing them and stressed the importance of strong fiscal and spending restraint.
ECB Chief Duisenberg said there are some risks to the Eurozone inflation outlook from rising oil prices, and that food and oil prices were keeping Eurozone inflation above 2%.
Media doesn't say anything on rising US inflows. Friday's release of the latest portfolio flows data in to the US by the US Treasury, showed that portfolio inflows in March amounted to $79.42 billion, the largest net inflows in a single month since 1988. Interestingly the news went by quietly without the same media hype that was reported when the January and February data showed that combined inflows of $24.59 billion combined were below average.
The dollar index tumbled beyond its September lows, hitting 110.98, the lowest level since Mar 05 of last year. Illegal accounting practices by US corporations highlight foreign investors' averseness to US assets. The question now remains whether non-US companies will experience the same extent of accounting improprieties. Amid the primary catalysts to yesterday's stock tumble in the US was the resignation of Tyco's CEO Dennis Kozlowski, who was already under investigation for tax evasion and questionable accounting practices. The Industrial conglomerate's stock lost over half of its value so far this year when it first raised questions over its accounting practices.
Cable drifted around the $1.46 level following the BoJ intervention, and is increasingly facing resistance at 1.4635-40, followed by 1.4660 and 1.4680. Support limited at 1.4570, with further downside seen limited at 1.4540 and 1.4505-10.
USD/CHF regained the 1.56 level but any further upside seen capped at 1.5660. Subsequent resistance seen at 1.5770. Support starts at 1.5570 backed by fundamental support at 1.5530. A break below 1.55 calls up 1.54. Long-term support found just above 1.53, which is the trend line support extending from the 1.6108 low (June 2000), thru the 1.5895 (Jan 5 2001) and 1.5590 (Sep 2001).
The damage in US stocks was alleviated by the fact that NASDAQ closed up 15 pts at 1578, avoiding a close under the key 1560 level, which would have been the lowest in 8 months. Dow fell 21 pts at 9687 while S&P500 was little changed at 1040.
US markets turn to tomorrow's ISM services survey expected to have risen to 56 in May from 55.3. PMI services data from the Eurozone are expected to show expected to have edged up to 53.8 from 53.3.