The G7 market reecntly made a statement that signals aweakening trend in the U.S. dollar. This G7-statement wasthat more flexibility in exchange rates is desirable. Bytaking this step the G7 group highlighted that rigidexchange rate systems in the Far East and continuedintervening from the Bank of Japan (to strengthen the USdollar) is clearly unwanted.
The G7 now is focussing on the large imbalances in theeconomic world, especially the ones in the United States.The need for a weaker dollar is now official and apparentlyit is going to be a general weakening, not just against theyuan and the Japanes yen but all currencies.
The G7 says that to adjust the imbalances a multi-facetedapproach is needed, but the adjustment needed will have tobe smooth and gradual. In other words a higher euro cannotat all be excluded, but it has to come around nice andsmoothly, although the euro already risen versus the U.S.dollar.
Jyske Bank feels that a large general dollar weakening cancome. As far as USD/JPY is concerned they had a daily closebelow 115 on Friday and consequently are now in possessionof a net 100% sold position. Bank of Japan has disappearedin the market and the newly appointed finance minister inJapan – Tanegaki – has already stated that now it is up tothe Chinese to act.
Jyske forsees that unless the Chinese appear on the scenewith some kind of adjustment to their exchange rate systemBank of Japan might very well appear again should USD/JPYclose in on the next major support area at 110.00.
You can get more details from Thoamd Fischer at Jyske bankat FISCHER@jyskebank.dk
Until next message, good investing.