Analysts Comments

The British Pound (GBP)

Ian Gunner, head of FX research at Mellon Foreign Exchange
Mon, Oct 2 2006, 11:22 GMT Mellon Foreign Exchange - "The UK PMI was 54.4 up from 53.0, which had been the lowest reading since March. The market may be a little jumpy this week given the fear of a surprise rate hike on Thursday. However, recent softness in average earnings as well as the ONS revisions to GDP argues in favour of the MPC waiting to reassess the situation in November along with their quarterly forecast review."

Tim Clayton, economist at Investica
Mon, Oct 2 2006, 11:21 GMTInvestica - "The Monday data reported an increase in the CIPS index for the manufacturing sector to 54.4 in September from 53.0 the previous month and the solid reading will increase confidence in the economy. Interest rates are unlikely to be increased this week, but there will be a greater reluctance to sell the currency ahead of Thursday's Bank of England decision given the firm economic data."

The Japanese Yen (JPY)

Johan Javeus, FX strategist at SEB Merchant Banking
Mon, Oct 2 2006- "It seems to be the problem for the yen right now that even strong data from Japan is not doing much to help it. While of course it's good for Japan that the economy is doing better, this fact is also increasing the domestic level of risk appetite in Japan and that is making Japanese look abroad for investment opportunities and that is creating negative flows (for the yen)."

Tim Fox, currency strategist at Dresdner Kleinwort
Mon, Oct 2 2006, 11:46 GMT Reuters - "Interest rate spreads are implying that dollar/yen should be lower, it seems that investors in Japan are keen to pick up investments overseas despite the fact that their own yields are heading higher."

Boris Schlossberg, senior currency strategist at Forex Capital Markets
Mon, Oct 2 2006, 10:16 GMTFXCM - "The quarterly Tankan survey of Japanese Industry surprised to the upside printing at 24 versus 21 expected as business confidence was boosted by lower exchange rates which helped drive the critical Japanese export sector. The yen however, did not respond to the good news as traders focused instead on the smaller than forecast increase in Cap EX which rose 11.5% against 11.8% consensus."

Adam Cole, currency strategist at Royal Bank of Canada
Mon, Oct 2 2006, 09:40 GMTAFX News - "In the long-term context Japanese institutions are raising their exposure to overseas assets and reducing hedging on (these) positions. So a better economic picture is leading investors in Japan to take more risks. So the good news seems to be the bad news for the yen."

Yuji Kameoka, senior currency analyst at Daiwa Institute of Research
Mon, Oct 2 2006, 09:21 GMTReuters - "This tankan was positive for the yen but not strong enough to convince the BOJ to immediately lift interest rates, so the market's reaction was muted."