Conflicting Forces On The Yen

Overall, the yen should remain stable within clearly defined parameters. The currency had already priced in a Koizumi victory, meaning that post-election gains were very limited. In addition, the US dollar has rebounded as fears about Hurricane Katrina damage have abated somewhat. Immediate support for the yen exists at around JPY111.60-112.00/US$. However, the yen should be supported by ongoing equity inflows, which have driven the Nikkei to a 4 ½-year high of 12,900. On the upside, resistance exists at JPY108.80/US$.

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