MARKET TALK/JP: USD/JPY Over 108.75 Would Be Bullish Sign

	[Contact Us: Tokyo 813-5255-2929] 0431 GMT [Dow Jones] If USD/JPY closes out week above 108.75, trend would send bullish signal on weekly basis, says Citigroup, citing technical analysis; but for now, short-term outlook remains bearish, targeting 106.11, 105.16 then 103.40. Pair last at 108.60. (RNH) 0421 GMT [Dow Jones] Association of German Mortgage Banks Managing Director Otmar Stocker in Tokyo today marketing to Japanese investors benefits of German covered bonds, which backed mostly by mortgages. But it's a tough sell, according to head of sales in Tokyo at HVB, as bonds offer spreads of only about 15 bps over bunds, while Japan investors still favor U.S. market when buying foreign bonds as U.S. yield curve steeper than Europe, FX hedging costs lower. (ILM) 0419 GMT [Dow Jones] USD/JPY edges up as players who've been selling since last week on expectations of modest Fed rate hike, similar FOMC statement, JPY-bullish BOJ tankan look to minimize some of their exposure as events draw near, says Japan brokerage trader; immediate resistance at yesterday's high of 108.77, which will likely hold as moves restricted to position adjustments. Pair now at 108.63.(MXT) 0417 GMT [Dow Jones] Japan housing starts, due 0500 GMT, expected +0.1% on-year in May, finds Dow Jones/Nikkei poll; would follow unexpected 4.1% fall in April after 4-month run of increases. Modest rebound would suggest consumers growing more willing to snap up big-ticket items; data yesterday showed consumers bought more durable goods last month, such as TVs, PCs, furniture.(TAN) 0402 GMT [Dow Jones] Yen interest rate swaps yield curve flattens from short to medium-term zone, but steepens beyond medium-term; stabilizing of JGB yields prompting players to cover pay positions, mainly in medium-term zone, which they had created previously to hedge future rises in rates, traders say; 2-year swaps down 1.25 bp at 0.26125%, 5-year swaps drops 3.875 bps at 0.9375%, 10-year swaps 3.50 bps down at 1.86%. Overall trade quiet as players sidelined before FOMC results later, BOJ tankan tomorrow. (HM,MXS) 0322 GMT [Dow Jones] Volatility implied by 1-month ATM USD/JPY options down further at 10.60%/10.85% vs 10.70%/10.90% in Asia earlier, with spot stable, says Japan bank dealer; but 1-day implied vol still at high levels - around 14%/16%, like yesterday - ahead of FOMC meeting, Fed release of policy statement, BOJ tankan. High premiums mirror expectations that if those events deliver any surprises, that may quickly push USD/JPY out of broad 107.00-110.00 range in either direction.(TAN) 0218 GMT [Dow Jones] Nikkei nearly flat midday, up 0.08 points at 11860.89; players say domestic institutions taking profit before release of tankan tomorrow, with expected strong result already mostly factored into prices. Japan economy strength going into 2H "still unclear, so many of us are waiting to see what tankan will reveal" for outlook beyond September, says Mitsushige Akino of Ichiyoshi Investment Management. Index likely capped near 11900-12000 but support solid near 11800; end-month window dressing helping support. Topix up 0.05% at 1187.55.(MYA) 0211 GMT [Dow Jones] EUR/JPY up 50 sen, probably on short-covering by speculators who sold yesterday, says Tokyo bank dealer; also, buying by Japan investors of EUR-denominated assets may be shoring up pair. Tips EUR/JPY to range between 130.70, 131.30-40 for rest of Asia; "I have an impression it won't move much from here" with traders reluctant to tilt positions radically ahead of FOMC, tankan, he says. USD/JPY tipped to trade between 108.10-20, 108.78 (yesterday's high). (TAN) 0210 GMT [Dow Jones] Speculators buy USD/JPY, EUR/USD to adjust positions ahead of tonight's FOMC decision, pushing up former around 10 pips to 108.50, latter up about 20 to 1.2108, says senior Tokyo dealer. Expects both pairs, other majors to remain range-bound for rest of Asian session, with USD/JPY penned in 108.20-108.70 range and EUR/USD 1.2070-1.2150. (RNH) 0206 GMT [Dow Jones] JGBs off morning highs, with players negative about accumulating positions before tankan tomorrow; early gains were on short-covering and position-adjustments. But market supported as pension funds set to buy cash bonds later, says trader. Lead September futures up 0.36 at 134.91, after rising to 134.95; 10-year yield down 3.0 bps at 1.800%. (HIN) 0200 GMT [Dow Jones] USD/JPY, now up 20 sen at 108.40, still faces risk of slip below 107 (near June 24 low of 107.02) if tankan results as strong as expected, says Chuo Mitsui Trust and Banking's senior FX manager Katsunori Kitakura. "The ultimate determinant (of FX rates) is economic outlook, and Japan's growth rate is highest" among U.S., euro zone, Japan; so "there'd be no reason for the dollar to halt its slide above Y107.00" after good tankan. Also, with Fed expected to maintain pledge to move forward at "measured" pace, not much USD-boosting impact likely from FOMC, he says. (TAN) 0148 GMT [Dow Jones] USD/JPY, now up 20 sen at 108.40, still faces risk of slipping below 107.00 (near June 24 low of 107.02) if BOJ tankan results as strong as expected, says Chuo Mitsui Trust and Banking's senior FX manager Katsunori Kitakura; "the ultimate determinant (of FX rates) is economic outlook, and Japan's growth rate is highest" among U.S., euro zone, Japan; so "there'd be no reason for the dollar to halt its slide above 107.00 yen" after good tankan. Also, with Fed expected to maintain pledge to move forward at "measured" pace, not much USD-boosting impact likely from FOMC, he adds.(TAN) 0139 GMT [Dow Jones] Volatility implied by 1-month ATM USD/JPY options down at 10.70%/10.90% vs 10.80%/11.10% in NY overnight, partly due to spot's recovery reducing demand for downside hedges, says Japan dealer. Lowest since April 28 in Asia, suggesting concern over spot's declines ahead easing as expected Fed rate hike draws closer. 1-month 25-delta risk-reversals now favor USD put/JPY call by 0.7%/0.95% vs 0.7%/1.1% in NY overnight.(TAN) 0138 GMT [Dow Jones] Players should exit USD/JPY shorts, which were established at 109.30, at current levels for profit of around 100 pips, writes UOB; says although mid-term outlook still bearish, any breach of resistance at 108.80 would imply recent low of 107.00-107.05 is extent of current downtrend, immediate downside target of 106.00 won't be hit. Adds charts suggest downward momentum continues to wane, further sharp losses unlikely. Pair last at 108.47.(RNH) 0136 GMT [Dow Jones] August Nymex crude +2 cents at $35.68/bbl on Access after plumbing 11-week lows in N.Y.; some nibbling after recent slide which came as supply fears eased, but interest to remain tepid until at least Friday, when some may buy as insurance for 3-day U.S. weekend. "In the last three or four weeks, fundamentals have been gradually winning. Generally speaking we're in a market that's coming down, but you'll have occasional rallies" on geopolitical risk, says analyst. Support at intraday low $35.52.(RXM) (END) Dow Jones Newswires June 30, 2004 00:32 ET (04:32 GMT)