27 September 2002, 12:18  Forex - Major currencies rangebound in early London trade, Dollar well bid

LONDON (AFX) - Major currencies moved into narrow ranges against each other in early trade with the Dollar remaining well bid after a set of favourable US data yesterday, dealers said. "A firmer tone to US equities and upbeat economic data - durable goods, jobless claims and new home sales all suggest the US economy retains decent momentum - and have imparted a slightly steadier feel to the dollar," said Steve Pearson, head of currency strategy at HBOS Treasury Services.
US economic data over the next week take on pivotal importance, with September ISM manufacturing and non-manufacturing and labour market report all scheduled for next week. "If fears of a double-dip are to be convincingly refuted these surveys need to improve. The consensus call is for modest rise in both. A week of strong data would leave the world looking a lot more Dollar-positive place," he said.
For now however, trading is likely to remain quiet with the only important data the University of Michigan Consumer sentiment report. Elsewhere, mounting problems surrounding the EU's stability and growth pact have yet to impact the euro materially, dealers said.
"France is clearly testing the EU Commission's patience. The French Government has published a budget deficit projection based upon some very optimistic growth assumptions that does not get to the required balanced position by 2006. The ECB response to all this will be interesting," Pearson said. The yen was also little changed despite Japanese Finance Minister Masajuro Shiokawa's pledge to inject public funds into the banking system.
In the meantime, there was more evidence of foreign capital flowing out of Japan, keeping intact the upward pressure on dollar-yen. "Latest weekly capital flows data from the MoF reveal the level of foreign selling gathering pace. Overseas investors sold 3.1 bln usd of Japanese bonds in the week ended Friday and 3.5 bln usd of Japanese equities. Foreign equity investment in Japan has now turned negative on a fiscal year-to-date basis for the first time, suggesting investors are beginning to reinstate their underweight position in Japanese equities," Pearson at HBOS said. The level of foreign funds going into Japanese bonds have also started to waiver, he noted. //www.forexdirectory.net

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