15 July 2005, 10:05  US dollar mixed in Tokyo early afternoon trading ahead of US data

The US dollar was mixed against other major currencies, with investors hesitant to take fresh positions ahead of the release later today of more US economic indicators, dealers said. Later in the day, US June PPI and June industrial production data, among other things, will be announced. "If today's economic indicators confirm the strong nature of US economic activity and enhance the perception that the US Fed will maintain its interest rate hike cycle, the dollar could test the heavy resistance level of 112.50 yen once again," said Mitsubishi Securities foreign exchange manager Minoru Shioiri said. Other US economic data have shown a mixed trend, as retail sales came in much stronger than expected, but the CPI showed a benign inflation trend, dealers said. On the other hand, the continued advance on the equity market here weighed on the top side of the dollar against the yen, dealers said. "If the benchmark Nikkei 225 index tops the psychologically important 12,000 point level, this may encourage further buying of the yen by foreign investors," Shioiri said. "In addition, the lingering uncertainty over the process of the floatation of the yuan could further pressure the dollar's gains against the yen," he added. At 12.30 pm (0330 GMT) here the euro was at 1.2090 usd, compared to 1.2104 usd more than two hours earlier in Sydney and 1.2083 in late New York trading. The dollar was at 112.10 yen, compared to 112.14 yen in Sydney and 112.35 in New York. The euro slipped in Asian trading, consolidating its overnight advances in the wake of the release of strong economic data for the euro zone, dealers said. The EU statistics office announced overnight that euro zone GDP rose 0.5 pct in the first quarter from the fourth quarter, making an annual rate of 1.4 pct, against expectations of 1.3 pct. "Given receding worries over imminent rate cuts in Europe and over political risk there, the euro, rather than resuming falls against the dollar, is most likely to rise in the near term," Shioiri said. Also helping diminish worries over possible interest rate cuts in Europe were the release of a strong industrial production in France and remarks by European Central Bank (ECB) officials, dealers said. ECB economist Otmar Issing said that the inflationary outlook in the euro zone has worsened, suggesting interest rates are already low enough to support growth. "But any rebound of the euro is likely to be limited to around 1.2350 usd," Shioiri said.

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