Reply #3: daily dollar watch

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http://quotes.ino.com/chart/?s=NYBOT_DXY0

Last trade 92.32 Change +0.23 (+0.25%)

HOW JAPAN INTERVENES

http://today.reuters.com/PrinterFriendlyPopup.aspx?type=bondsNews&storyID=uri:2005-11-16T081907Z_01_T339684_RTRIDST_0_MARKETS-JAPAN-INTERVENTION-FACTBOX.XML

- The Ministry of Finance (MOF) is authorised to intervene, and the Bank of Japan conducts operations on its behalf.

- Funds needed for intervention come from Japan's Foreign Exchange Fund Special Account (FEFSA).

- In the case of intervention in which a foreign currency is bought and yen sold, the MOF raises yen funds to be sold by issuing financing bills (FBs).

- In the case of yen-buying intervention, the BOJ sells foreign currencies from the FEFSA. Japan had foreign reserves of $841.792 billion as of the end of October, the largest in the world. The bulk of these holdings is believed to be in dollars.

- Foreign exchange intervention is usually conducted in the Tokyo market, but if it is seen necessary to intervene in U.S. or European trading hours the BOJ will either do so itself or MOF will ask foreign monetary authorities to intervene on its behalf.

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Forex - Dollar remains firm vs yen in Asian trade but off overnight US highs

http://www.forextv.com/FT/AFX/ShowStory.jsp?seq=9774

SINGAPORE (AFX) - The US dollar remained firm against the yen in late trade here but it was off the 27-month high of 119.42 yen touched in the US last night, with some profit taking capping the topside, dealers said.

They noted that some players were pocketing profits ahead of tonight's release of the US Treasury International Capital Systems (TICS) September portfolio flows data.

The US unit remains supported on expectations for continued US rate hikes, aided by Federal Reserve Chair nominee Ben Bernanke's overnight remarks to a Senate Committee as well as some solid US economic data.

A call from Japanese Prime Minister Junichiro Koizumi on Monday for the Bank of Japan (BoJ) to continue its super loose monetary policy is also being taken as a cue that the interest rate differential between US and Japanese assets will remain wide for some time.

The dollar eased back from its New York high as some players adopted a wary stance ahead of the TICs release to ensure that the data shows that foreign demand for US assets remains sufficient to fund the mountainous US current account deficit.

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Tomorrow's Economic Releases: Will TIC Data Hold Up After September's Hurricanes?

http://www.dailyfx.com/index.php?option=com_content&task=view&id=4869&Itemid=39

U.S. Consumer Price Index (OCT) (13:30 GMT, 8:30 EST)
Consensus: 0.0% (MoM); 4.1% (YoY)
Previous: 1.2% (MoM); 4.7% (YoY)

Outlook: Consumer prices in the US are expected to have remained unchanged in October. This estimation is based heavily on the fact that gasoline prices have seen a 25 percent drop from their all-time highs following Hurricanes Katrina and Rita. A mild winter this year may relieve the U.S. economy of the rapid inflation it has seen in recent months at the hands of soaring energy prices. Although energy prices may be in check for the time being, it is important to note that core inflation in October is expected to increase to a rate of 0.2 percent, which indicates that energy inflation may have already seeped through to other sectors. Large goods and service providers such as Deere farming equipment, FedEx shipping, and Carnival cruise lines have forecasted significant price increases for the coming year ranging from 4 to 16 percent. While people are experiencing relief at the pump on their energy bills, it is possible that consumers will continue to pay for previously high oil prices through other means. As heavy spending continues, this threat of core inflation is becoming more problematic and is likely to encourage the Federal Reserve to maintain its tight monetary policy.

Previous: In September, consumer prices in the United States increased at a rate of 1.2 percent from the previous month. Economists had expected the rate of price inflation to register at 0.9 percent. Instead, the CPI made its biggest jump since March 1980. Unsurprisingly, the jump in consumer prices resulted largely from a surge in energy prices following the Gulf Coast hurricanes, which crippled many critical refineries and pipelines, limiting the supply of refined crude oil. The limited energy supply forced consumers to pay 12 percent more for gasoline and other energy products. Core inflation, which excludes volatile energy and food costs, came in less than expected as it made a gain of only 0.1 percent. Much of the inflation in the core index resulted from higher prices in the service sector, which accounts for 60 percent of the total index. September’s energy-led inflation weighed in on consumer confidence as the University of Michigan’s confidence gauge fell to its lowest point in 13 years.

US Net Foreign Security Purchases (SEP) (14:00 GMT, 9:00 EST)
Consensus: $70.0B
Previous: $91.3B

Outlook: The latest Bloomberg median estimate for September’s TIC data is $70.0 billion. This figure would, again, be above the average of $66.3 billion in the 12 months up to August. Faith in the US economy has been strong with third quarter GDP growing at a rate of 3.8 percent. Meanwhile, the Fed’s overnight lending rate has been rising consecutively in the past twelve FOMC meetings and is forecast to surpass the Bank of England’s rate in the next few months. Furthermore, the US fiscal climate is also in good health as the government budget deficit fell to $318.6 billion in fiscal year 2005, ending in September, from$412.8 billion in fiscal year 2004. However, despite these positive figures, keep in mind that the transactions included in this report all occurred in September, at the height of uncertainty after the recent hurricanes. Interestingly enough, less than a month ago, some analysts had been claiming that net foreign security purchases would slow to around $50 billion in the coming months due to the extra risk from the hurricanes’ effects and higher energy prices.

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