Muted reaction to Ben Bernanke (page 2 of 2)

Comments from an official at the Chinese academy of Social Sciences who stated that an appreciation in the yuan looks inevitable supported the Japanese currency, although a broadly stronger dollar kept the yen on the back foot.

The failure of the dollar to break through the crucial 116 yen level and a weaker than expected US consumer confidence number helped the yen recover some lost ground as it sprinted towards 114.60, during a brief period of dollar weakness seen across the board.

The market also showed little reaction to news that Japan's trade surplus for September narrowed by 21.1 pct, mainly due to costlier oil imports. Meanwhile, with data in the euro zone suggesting improved economic conditions, the yen reversed course as Japanese demand for euro zone bonds pushed the currency above 116.00 per dollar - a new 25 month high.

However, aggressive selling by Japanese exporters and options traders blocked a further fall in the currency beyond the key 116.00 level. The yen is likely to be range bound in the week ahead as all eyes will remain focussed on the US Fed and the release of key economic data.

Range for this week: Y113.30-Y116.30

Sterling

Sterling experienced a week of mixed fortunes as it seesawed based on economic and political developments in the United States. A report that showed a decline in UK house prices dampened investor sentiment at the start of the week, although market reaction was limited following last week's strong UK retail sales.

As the week progressed, Sterling was the beneficiary of a strong German Ifo as a rally in the euro also spilled into the UK, helping the British Pound to a one-month high. The absence of any major UK economic data also helped, whilst hawkish comments from Bank of England Governor Mervyn King also kept the British Pound well supported.

King said the British economy appeared to be on course for a bumper ride over the coming years following remarkable stability in the last few years and helped cool speculation of a rate cut. Meanwhile, a decline in British factory orders took some shine off Sterling as it settled to trade around $ 1.7750.

As the week drew to a close, Sterling flexed its muscles once more, after benefiting from lack-lustre US data and cantered to a fresh one-month high above $ 1.7900. The currency was also supported by data showing an annualised 17-pct rise in mortgage approvals that indicated a buoyant British property market.

Range for this week: $1.7660-$1.7960