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Thx Hil.

LONDON (Reuters) - The pound has surged above $1.80 for the first time in over 11 years as dovish comments from a Federal Reserve official put the beleaguered dollar under further pressure.

The dollar's latest tumble came after Federal Reserve Governor Ben Bernanke said at the weekend there was little risk of a crisis stemming from the dollar's fall and no immediate reason to raise U.S. interest rates from 45-year lows.

"Bernanke's comments were the catalyst for further dollar weakness but independent sterling strength came through as stops around $1.80 were taken out," said Adam Cole, senior currency strategist at Credit Agricole Indosuez.

"There is a general feeling in the market that there is little to stop the dollar's fall."

Sterling rose three-quarters of a percent to a high of $1.8069 in late London trade, bringing its gains to 14 cents in less than two months.

Sterling is now at its highest against the dollar since September 1992, the month Britain withdrew from the European Exchange Rate Mechanism after losing a fierce battle with speculators.

Sterling shed a quarter of its value in the five months that followed Britain's exit from the ERM but traded in a narrow trading band for most of the following decade, averaging $1.56.

RATE FACTOR

U.S. interest rates at just one percent have dented the appeal of dollar deposits at a time when the United States needs to attract growing sums of overseas investment to fund its current account deficit.

"If the Fed does not see a weak dollar as an inflationary threat, it has little reason to raise interest rates and the trend of dollar weakness will continue," said Shahab Jalinoos, senior currency strategist at ABN Amro.

The Bank of England holds its January meeting on interest rates later this week. The Bank raised rates by a quarter-point to 3.75 percent in November and the market is pricing in another hike early this year, although most analysts expect it to stand pat until February.

Sterling pushed marginally higher against the euro, at 70.14 pence, but did not break out of its recent trading range.

For most of the past year, sterling traded as a half-way house between the euro and the dollar but a raft of strong British data in recent weeks has allowed the pound to keep pace with its euro zone counterpart.

DAILY MARKET COMMENTARY
5 January 2004
Monday

North American Comment at 1500 GMT

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GCI Foreign Exchange Research: http://www.gcitrading.com/fxnews/
FX Research Desk: fxnews@gcitrading.com
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Fundamental Outlook at 1500 GMT (EDT + 0500)



The euro established another lifetime high vis-vis the U.S. dollar today as the single currency tested offers just below the 127.00 figure. Stops were triggered above the $1.2620/ 80 levels and strong options-related offers did not emerge until just below the $1.2700 options barrier. News of a new Osama bin Laden tape weighed on the dollar overnight and traders largely shrugged off U.S. economic data that saw a 1.2% increase in November construction spending. The big story involving the greenback today were comments made over the weekend by Fed officials. Fed Governor Bernanke weighted in on the dollar a rarity among Fed officials saying the odds of a dollar crisis are quite low and added interest rates will remain low for some time. These two comments are dollar-negative and traders used them to buy euros. Bernanke said the dollar is strong by some historical standards and added the Fed has the luxury to keep interest rates at the historically unusual 1% level. Greenspan spoke over the weekend and said the Fed was vindicated by policy developments for not bursting the asset price bubbles of the 1990s but conceded there is still a lot of uncertainty in monetary policymaking. Ifos Sinn today said a euro rate of $1.30 would be the pain threshold while the EC said it is in favour of a strong and stable euro. Data released in the eurozone today saw EMU-12 December flash HICP at +2.1%, down from 2.2% in November. Other data released today saw EMU-12 industrial orders rise 1.6% m/m in October while German November retail sales were off 1.8% m/m and 4.8% y/y. Euro offers are cited around the $1.2700 figure with bids seen around the $1.2640/ 20 levels and stops below the $1.2580 level.





The yen appreciated vis-vis the U.S. dollar today as the greenback tested bids around the 106.10 level during North American dealing, its lowest level since September 2000. The pair spiked through the 107.35 level during Australasian dealing on account of BoJ intervention. Banks deemed to be acting on behalf of the central bank are estimated to have purchased around US$ 3 5 billion today. It is clear the Japanese authorities are not trying to or are unable to reverse the yens rise but instead are conducting smoothing operations meant to slow the yens gains. MoFs Hayashi verbally intervened today saying the government has always said we will act appropriately and decisively against excessive (foreign exchange) movements. MoFs Mizoguchi added the government is ready to take steps to make sure the exchange rate does not overshoot. PM Koizumi pledged to continue with his ambitious reform agenda while FSA boss Takenaka said Japanese banks are aiming to halve their bad-loan ratio by March 2005. Data released in Japan today saw December PMI fall 0.4 index points to 56.0 but remained above the boom or bust 50.0 level for the seventh consecutive month. The December PMI output index fell 0.7 points to 58.8 while the December PMI new orders index fell 1.2 index points to 60.2. The Nikkei 225 stock index gained 1.39% on the first day of trading in 2004. Dollar offers are cited around the 107.50 level and options traders cite an option barrier around the 106.00 figure with other options triggers around the 105.80 level. The euro lost ground vis-vis the yen today despite testing offers around the 135.75 level. The pair fell to the 134.40 level during North American dealing after dropping nearly 1 in one hour during European dealing.





The British pound exploded higher vis-vis the U.S. dollar today as cable crossed above the psychologically-important US$ 1.8000 figure, the first time it has been at this level since September 1992. Sterling reached an intraday high around the $1.8080 level after stops were triggered above the $1.8025 level. The $1.8000 figure was seen as an option barrier but this level fell with little difficulty. The Ernst & Young ITEM Club is predicting the U.K. economy will grow by 2.8% in 2004 but it warned about the recent undershoot in tax revenues. Cable bids are cited around the $1.7955 level with stops below the $1.7940 level. The euro weakened vis-vis the British pound today as the single currency tested bids around the 0.7005 level after running out of steam around the 0.7065 level. Euro offers are cited around the 0.7080 level and stops are cited below the 0.6990 level.





CHF

The Swiss franc gained ground vis-vis the U.S. dollar today as the greenback fell to the CHF 1.2280 level, its lowest level since September 1996. A Swiss survey released today showed that growth in Switzerlands manufacturing industry decelerated in December. The SNB today reiterated its forecast that the economy will continue to recover in 2004, possible registering growth of 1.5% this year. The central bank also reiterated interest rates are on hold. SNB added overnight, tomorrow/ next, and one-week liquidity at 0.11% today, unchanged from recent repo operations. The euro gained ground vis-vis the Swiss franc today, testing offers around the CHF 1.5645 level.



Technical Outlook at 1330 GMT (EDT + 0500)

(Bid Price) (Todays Intraday Range) (Previous High, Low, Close)

EUR/ USD 1.2660 1.2697, 1.2584 1.2631, 1.2523, 1.2584
USD/ JPY 106.24 107.38, 106.15 107.53, 106.81, 106.98
GBP/ USD 1.8039 1.8049, 1.7971 1.7951, 1.7786, 1.7936
USD/ CHF 1.2329 1.2395, 1.2282 1.2461, 1.2344, 1.2391
AUD/ USD 0.7661 0.7677, 0.7636 0.7595, 0.7501, 0.7580
USD/CAD 1.2794 1.2893, 1.2780 1.3030, 1.2864, 1.2882
NZD/ USD 0.6690 0.6708, 0.6668 0.6598, 0.6524, 0.6592
EUR/ JPY 134.45 135.75, 134.31 135.14, 134.19, 134.71
EUR/ GBP 0.7015 0.7063, 0.7013 0.7061, 0.7013, 0.7020
EUR/ CHF 1.5617 1.5635, 1.5577 1.5623, 1.5574, 1.5593
GBP/ JPY 191.61 192.72, 190.98 192.06, 190.27, 191.90
CHF/ JPY 86.11 87.06, 86.07 86.73, 85.92, 86.37





Support Resistance Support Resistance

EUR/ USD USD/ JPY

L1. 1.2400 1.2660 106.75 110.60
L2. 1.2325 1.2730 106.00 111.20
L3. 1.2225 1.2790 105.00 112.00



GBP/ USD USD/ CHF

L1. 1.7400 1.7775 1.2350 1.3200
L2. 1.7330 1.7825 1.2270 1.3300
L3. 1.7250 1.7900 1.2200 1.3400



AUD/ USD USD/ CAD

L1. 0.7000 0.7580 1.2900 1.3500
L2. 0.6960 0.7650 1.2830 1.3575
L3. 0.6910 0.7725 1.2770 1.3660



NZD/ USD EUR/ JPY

L1. 0.6350 0.6580 130.40 135.75
L2. 0.6300 0.6620 129.90 136.50
L3. 0.6250 0.6670 129.25 137.30



EUR/ GBP EUR/ CHF

L1. 0.6800 0.7170 1.5450 1.5750
L2. 0.6750 0.7250 1.5410 1.5800
L3. 0.6700 0.7310 1.5370 1.5860



GBP/ JPY CHF/ JPY

L1. 185.50 192.30 78.90 87.00
L2. 185.00 193.00 78.30 87.60
L3. 184.00 194.00 77.25 88.25

Becoming interested in dollar-pound and dow-ft100 ratios.

Today anyone short on the cash dow would have been down 75 points as I type which is currently 0.7%

Today anyone selling dollars for pounds would be up 0.9% approx (FOREX figures)

Therefore I muse if I had gone short on the dow today (in pounds) would my short losses be offset by any currency gains, and in this Alice in wonderland senerio would my loosing short actually win in cash pounds??

oh well my first two Forex trades end in loosers...... -30 and -35 juts as well they were only for a few quid per point.......

caps off a thoroughly crap day for me...... ;-0

Tw: Download the saxobank software and they have an analysis on the forex which is for evermorning and updated for the afternoon.You can also get it as email.They seem to be quite good and also give suggestions for going long and short -also when to stand aside. I have been looking at them for a while and traded them and can honestly say that they have paid off for me.

rgds
zarif

will take a look but these currencies are mean....they can be even worse then the dow! :-)

Thing about the low $ is that it makes it easier for the USA to export. That means more growth in the US which is the economic engine of the planet. Feeds back on itself doesn't it. And then the oil price works the same way. This all smacks of the G8 (or what ever they are now) agreeing on the week dollar until the world economy is back on track. Forex is on my list for this year and the safest route at the moment (for trend) is an increasing drop in the value of the dollar and the counter-balance of increasing gold price (in dollars ain't it).

Nice thread Hil - didn't know you had the HTML in your skill box as well as "those legs" ;-)

BOJ SUSPECTED TO HAVE INTERVENED IN FOREX TRADING - JIJI

Paul,

You can use Sharescope to examine a currency and overlay a share or index. Personally, I can't see the merits of pairs trading an index -v- a currency, but wdik?

Treble,

Sorry to hear about your losses. The bulk of the price action has been away from the EUR/GBP recently which looks to be consolidating. There are still some nice trends to latch onto with the other currencies though. Personally, I wouldn't trade against the trend but, again, wdik?

BT,

Legs and html .... what more could you want in a girl?

To follow on from US exports being helped by the weak dollar, the reverse is true of the Yen. The low Japanese interest rates are stimulating domestic growth on one side of the coin, but unless the Japanese exporters are hedging on the FX markets, weaker exports will stifle profits which could in turn adversely affect the NIK. There has been a theory recently that the Bush administration has been leaning on the BoJ to hold off from buying the Dollar until the New Year to enable US exporters to report earnings growth, thereby boosting the Dow ahead of Presidential elections.

for her to phone ?

Options Expire in the next hour on Euro$ according to Bloom. Battle going on to get it over 1.28... could be volitile, as vol picking up...

Trying again......

Hi - Does anyone use CMC for /$ spot?

If so I need some help.

I am confused by the order screen.

If I want to say buy $ - do I enter sell say 1,000?

Sorry if this is too low brow! It's got me baffled.

I have used CMC for /$ spot. If you think the $ is going to increase in value then you sell /$ for however much pounds per pip. 100 pips per Cent. One thing to bear in mind is volatility which can move this currency pair 100pips plus every day in both directions!. So if you use stops you need to give them a wide berth! Be careful and good luck!!

richesboy - thanks - I tried - but my account is not authorised (a CFD a/c) I'll have to ring them.

I guess the CFD a/c must be set up somewhat differently to SB a/c which I have!

Sue. The order screens always have the buy/sell relating to the first currency quoted. But it can be confusing - for instance IG Index have Euro/Sterling to bet - ie 0.7000, but their chart shows /Euro - ie 1.42. It's to do with the fact that the and Irish Punt are traditionally quoted first worldwide, no matter what thay are being quoted against (I think that's the right way round). No doubt someone will correct me if I'm wrong.

SINGAPORE (AFX-ASIA) - The US dollar was rangebound against the yen and
weaker against the euro, which stayed above the 1.27 level after hitting fresh
highs, dealers said.
BNP Paribas Peregrine Securities currency analyst Thio Chin Loo said the
weakness trend for the dollar remains intact but the greenback is finding some
temporary support near the 106 yen level.

Singapore 3.00 pm Tokyo 12.20 pm
Dollar
yen 106.23 down from 106.32
sfr 1.2334 up from 1.2330
Euro
usd 1.2724 up from 1.2706
stg 0.6984 down from 0.6988
yen 135.11 up from 135.09
sfr 1.5691 up from 1.5667
Sterling
usd 1.8211 up from 1.8182
yen 193.36 up from 193.31
sfr 2.2456 up from 2.2418
Australian dollar
usd 0.7685 up from 0.7671
stg 0.4217 down from 0.4219
yen 81.590 up from 81.558