-
Yen needs Nikkei rebound
The Yen will continue to be hampered by the Nikkei index decline, especially with further unease over the technology sector. Optimism over the economy is also liable to fade slightly. The dollar will, however, still find it difficult to make much progress. The risks of a weaker yen during this week have increased slightly, but the dollar still offers little value above the 110.2 level, especially with exporter selling above 110.0. The dollar has fluctuated in narrow ranges against the yen over the past 24 hours. The dollar has still struggled to maintain a position above the 110.0 level and it weakened to 109.7 in early Europe on Tuesday. There will be further exporter selling above the 110.0 level. The Nikkei index has remained fragile with a further 1.0% decline in the headline index. The corporate earnings reports due at the beginning of August will be watched closely. Until the Nikkei index can secure a sustained rebound, yen buying interest will remain fragile. There has been some cooling of enthusiasm over the Japanese economy and this will tend to discourage overseas capital inflows. The dollar will still find it difficult to take advantage of Japanese vulnerabilities given the Wall Street weakness and the underlying Japanese balance of payments surplus. Analysis supplied by