Dollar tests multi-month highs (page 2 of 2)

However, the release of the US trade balance for December and the eventual annualised US trade deficit of USD 617.7 Billion proved too much for the greenback to handle as it allowed the yen to regain almost all lost ground and settle around 105.60.

The release of the Japanese current account balance for December, consumer confidence for January, GDP for 4Q '04 and a Bank of Japan meeting to decide on monetary policy will be key events in the Japanese economic calendar next week.

Range for this week: 103.30-106.30

Sterling

With England having lost the six nations Rugby opener to Wales in Cardiff after 12 years, Sterling commenced the session on a sombre note as absence of key UK data left the currency vulnerable to movements against the broadly stronger US dollar.

With analysts expecting the release of UK data to be mixed, Sterling lost ground against a resurgent greenback, falling below $ 1.8600 - hitting a 2 ½ half month low of $ 1.8512.

The crash came mainly as a result of dollar cheers brought about by an upbeat assessment of the US economy by Fed chairman Greenspan and an optimistic budget plan by President Bush.

The release of stronger-than-expected UK trade and manufacturing data added some support to the currency and helped it regain its footing. The UK trade deficit narrowed to GBP 4.43 Billion in December from 4.71 Billion in November, against expectations of a wider reading of GBP 4.8 Billion.

The decision by the Bank of England to keep interest rates unchanged at 4.75 pct, offered little reaction as the release of the US trade balance across the Atlantic took centre stage, and pushed the pound lower to a new 11-week low of $ 1.8510.

However, the dollar's joy was short-lived, as a closer look at the US trade deficit brought about a reversal in fortunes for the greenback, which gave up most of its gains.

Range for this week: $1.8550-$1.8850