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Date: Thu, 10 Jan 2002 05:57:15 -0800 (PST)
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[IMAGE] Forums Discuss these points in the Forums:  Forexnews Forum       T=
echnicals Live Charts Analysis available from: Cornelius Luca   J.P. Chorek=
   Technical Research Ltd.   Charts & News featuring Standard & Poor's     =
   Interest Rates  US: Japan: Eurozone: UK: Switzerland:   1.75%  0.15%  3.=
25%  4.0%  1.25-2.25%        [IMAGE]   =09 [IMAGE]  GBP Steady After BoE Ke=
eps Rates at 4.0% January 10, 7:00 AM: EUR/$..0.8901 $/JPY..132.31 GBP/$..1=
.4425 $/CHF..1.6644  GBP Steady After BoE Keeps Rates at 4.0% by Jes Black =
 At 8:30:00 AM US Dec Export Prices (exp -0.2%, prev -0.4%) US Jobless Clai=
ms (exp 410k, prev 447k) US Dec Import Prices (exp -0.8%, prev -1.6%) At 10=
:00:00 AM US Nov Wholesale Inv. (exp n/a, prev -1%)  Sterling rose to day h=
ighs across the board ahead of the Bank of England's rate decision at 7:00 =
AM, which left rates unchanged at 4.0% as expected. Investors considered th=
e BoE's decision evidence that strong consumer spending was driving growth =
in the UK. GBP/USD rose more than one cent to a high of 1.4462 from an over=
night low of 1.4340, but remained within a channel from 1.4340 to 1.4480. A=
gainst the euro, sterling rose to a high of 61.73 pence, but resistance at =
61.70 held, which should keep sterling's gains in check. However, follow-up=
 buying in GBP was subdued as markets generally expected no rate cut from t=
he BoE.  The euro also rose to a day's high around 89.35 cents ahead of key=
 Eurozone data today, but fell following a surprise drop in German data. No=
vember industrial output fell 1.8% m/m after strong declines in the previou=
s months to bring the y/y down 4.8%. The decline beat the consensus forecas=
t for a fall of 0.2% and was very negative, but possibly not surprising giv=
en the amount of attention paid to Germany's manufacturing woes. Neverthele=
ss, the fall is likely to put Q4 GDP at or near 0% and will put the ECB in =
a bind to cut interest rates in February.   EUR/USD price action continued =
to move within a channel from 88.70 to 89.50 as it hovers around the key 89=
.10 level, which marks the 50% Fibonacci retracement of the move from 82.25=
 to 95.96. Overnight, the pair briefly tested resistance at 89.50, but was =
rejected. Now, failure to maintain above 89.10/20 would probably call for a=
 test lower to 88.70 followed by 87.60, which marks the 61.8% Fibonacci ret=
racement level of the same move. Moves higher are not seen by the market as=
 indicating strength given the euro's difficulty to remain above 90-cents. =
 Meanwhile, the yen pared earlier gains despite concerns voiced by Japanese=
 officials today that the yen's slide was too fast. Dealers were quick to b=
uy USD/JPY near the 132.00 level after its recent fall from a new 3-year hi=
gh of 133.37. PM Koizumi said at visit to Malaysia that Japan was not lower=
ing the yen intentionally and that FX rates should be decided by markets.  =
However, Malaysian PM Mahathir said he was watching with interest the impac=
t of a yen fall on the Chinese yuan and ASEAN currencies.   Concern over th=
e yen's 10% decline over the past 2 months corresponds with PM Koizumi's 7-=
day tour around Southeast Asia, which began on Wednesday. Although US monet=
ary officials have expressed a desire to let markets determine FX rates, co=
untries such as China and Korea have voiced concern about Japan exporting t=
heir deflation to the rest of the area. Overnight remarks by an official fr=
om South Korea's Finance and Economic Ministry that the weakening in the ye=
n could create malaise in other Asian markets, hints that for political rea=
sons Japanese officials are now likely to remain quiet until the PM returns=
.  Therefore, in the absence of further encouragement by Japanese monetary =
officials for a weaker yen, a period of consolidation would not be unusual.=
 But any correction in USD/JPY would likely hold around 130-132 dealers say=
. EUR/JPY rose to a day's high of 118.76 but needs to hold above yesterday'=
s low of 117.50 or it may target last week's lows around 116.90 and the 2-w=
eek low of 116.50. Upside is seen capped at 118.75 and last week's 2-year h=
igh of 119.71.  Despite the yen's reprieve from further losses, market sent=
iment remains very bearish. A recent report from the American Enterprise In=
stitute for Public Policy Research says that JPY will come under further pr=
essure in March once the market realizes that Japan is on the road to defau=
lt if it does not reflate the economy. The Economic Outlook report contends=
 that the government is expected to incur an unsustainable debt burden of $=
1 trillion in protecting depositors from the collapsing banking system in M=
arch when deposit insurance is revoked and Japanese investors likely make a=
 run on the bank, thereby bringing collapse.  Ex-Japanese Minister of Finan=
ce Sakakibara, aka Mr. Yen, also said he sees the yen possibly falling to 1=
50-160 per dollar towards year end. However, Sakakibara warned of possible =
intervention if the dollar rises above the psychological level of 140 yen. =
Mr. Yen said that yen weakness would permeate through to other Asian curren=
cies which should gradually weaken vs dollar along with yen. In reference t=
o Bank of Japan policy, he said the bank should keep easy monetary policy i=
ncluding more JGB purchases, but warned that excessive government spending =
would be ineffective and could lead to a collapse in the JGB market.  USD/C=
HF surged to 1.6619 after testing a session low of 1.6527 in early European=
 trade. Trendline support at 1.6500 followed by 1.6410 should hold for furt=
her test higher, as rumors that the SNB may have been intervening to weaken=
 the franc helped the currency slide to a low of 1.4833 vs the euro as well=
. The SNB is trying to talk the franc lower as a cheaper franc would boost =
export prospects and ease the economic pains facing the country. However, t=
he SNB is unlikely to dramatically lower interest rates to do so. Swiss Nat=
ional Bank Vice-Chairman Gehrig reportedly said in an interview on Wednesda=
y that the SNB's next move could be either up or down. This surprise commen=
t caught markets off guard and given that the economy should show flat grow=
th in H2 2002, as well as the central bank's dissatisfaction with the curre=
nt strong CHF exchange rate.  Meanwhile, markets will be looking for signs =
of economic recovery in the US and more gains on Wall Street after yesterda=
y's sour finish. The dollar strengthened across-the-board yesterday, encour=
aged by the rally in the US stock market for most of the day stemming from =
positive comments from technology bellwethers Cisco and Oracle. Even though=
 the gains in equities dissipated by the close of trading, the greenback ma=
naged to hold onto its gains against the majors. But, dealers will watch to=
 see if U.S. markets are getting ahead of themselves in anticipating a U.S.=
 recovery.     =09[IMAGE] Audio Mkt. Analysis Takenaka Leaves Little Doubt =
on Japan's FX Stance        Articles & Ideas  What's Next For the Euro?   A=
 Look Back at 2001, Forex Themes for 2002       Articles & Ideas Forex Glos=
sary   Economic Indicators   Forex Guides   Link Library      [IMAGE]  =09
=09=09[IMAGE][IMAGE] [IMAGE][IMAGE]=09
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