Thursday, November 25, 2004

Japan's ability for infinite intervention in support of the dollar seems set to continue.
Japan's consumer prices fell slightly in October from the same month a year earlier, underscoring widespread expectations that no immediate shift in the Bank of Japan's super-loose monetary policy was in sight.

Core nationwide consumer price index, which excludes the prices of volatile fresh food, was down 0.1 percent in October from the same month a year earlier, compared with a fall of 0.2 percent expected by economists.

The core index was unchanged from September on a seasonally adjusted basis, the data from the Ministry of Internal Affairs and Communications showed on Friday.

"As a trend, deflationary pressures are easing, but it won't be until 2006 that deflation will come to an end," said Yoshimasa Maruyama, senior economist at Mizuho Research Institute.

Movements in consumer prices are closely watched as the BOJ has vowed to maintain its current ultra-easy monetary policy until year-on-year changes in core nationwide CPI stablises above zero.
The real question is not Japan's ability, but its will.
"It's certainly possible over the next couple of days that they do something," said Craig Ferguson, currency strategist in Melbourne at Australia and New England Banking Group Ltd. "We think they'll intervene above 100 yen, they can't afford to let it go through there."
Since it's Turkey Day in America, here are the numbers on our favorite turkey. Today the dollar fell all the way to �102.38 and to $1.3284 to the euro. Venting on the euro (and sterling) seems to be private capital's strategy du jour in light of justifiable fears that the Bank of Japan will crush yen speculation against the dollar.

How long can the Europeans sit on the sidelines? An even better question: how long before the European Central Bank, the Bank of Japan and the People's Bank of China realize that a coordinated dollar policy is in their best interests?

UPDATE: In Friday morning trading the dollar fell at least as low as �102.28, and the euro rose to at least as high as $1.3289. Interestingly, the pound is soaring most of all, up over 0.2% on the day against the dollar. Something's always cookin'!

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