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  Interest Rates   US: Japan: Eurozone: UK: Switzerland:   1.75%  0.15%  3.=
25%  4.0%  1.25-2.25%       [IMAGE] =09 [IMAGE]  BoJ Gives Into Government =
Pressure, JPY Falls In Dismay  February 28, 7:00 AM: EUR/$..0.8645 $/JPY..1=
34.15 GBP/$..1.4153 $/CHF..1.7059  BoJ Gives Into Government Pressure, JPY =
Falls In Dismay by Jes Black  At 8:30:00 AM US Jobless Claims (exp 370k, pr=
ev 383k) US Q4 Final Sales (exp 1.8%, prev 1.7%) US Q4 GDP q/q prel (exp 0.=
8%, prev 0.2%) At 9:00:00 AM US Feb New York NAPM (exp n/f, prev 243.6) At =
10:00:00 AM US Feb Chicago PMI (exp 47.2, prev  45.1)  The dollar traded in=
 a tight range against the European majors on Thursday as markets digested =
Fed Chairman Greenspan's guarded optimism and awaited key economic data fro=
m the US. Meanwhile, the yen was little changed from the Bank of Japan's de=
cision to increase its outright JGB purchases to one trillion yen a month f=
rom 800 billion, but it did fall in afternoon London trade as dealers saw l=
ittle hope in the anti-reform package presented overnight.   Today's econom=
ic data is expected to underpin Greenspan's outlook. Markets expect a healt=
hy revision to Q4 '01 GDP to 0.8%-1.0% from the advanced reading of 0.2%. S=
tronger spending and a fall in the trade deficit are credited for the incre=
ased optimism. Later in the morning, traders will assess the Chicago PMI fo=
r insight to the ISM's PMI on Friday. Chicago PMI is forecasted to rise to =
47.7 in February compared with the previous month's 45.1 as conditions in t=
he Midwest manufacturing region continue to improve. Weekly jobless claims =
are expected to decline to 370k from 383k.  Despite the upbeat forecasts, t=
oday's Enron hearings could keep the dollar under wraps as investors contin=
ue to look at stock market valuations with skepticism.    Data from the Eur=
ozone showed a jump in CPI to 2.7% in January from 2.7%. This was slightly =
higher than the 2.6% forecasted. Economists expect the figures to keep inte=
rest rate policy steady at the European Central Bank, which holds its next =
rate review meeting next week. Supporting this view was evidence that Euroz=
one M3 rose on a 3-month basis to a high of 8% from 7.8%. The ECB also watc=
hes M3 as part of their inflation outlook, but has long said M3 poses no re=
al price risks.   Recent comments suggest we are likely to see steady monet=
ary policy from the Fed, ECB and BoE for some time to come. At next week's =
Fed meeting, Greenspan is likely to keep the easing bias to avoid the probl=
em BoE Governor George ran into with markets driving yields higher on overz=
ealous expectations of rate hikes.  EUR/USD maintained in a tight range aro=
und 86.40 after dropping overnight to a 3-week low of 86.27 before again te=
sting resistance around 86.60 in today's session. Sentiment is again turnin=
g bearish, but only a move through 86.30/15 on its way to 85.63 low would p=
ut the euro back in full bear mode. Support is seen at 86.30, 86.15, and 85=
.60. Resistance is viewed at 86.60, 87.10, and 87.85.  GBP/USD broke below =
support at 1.4180 after and revisted an overnight 2-week low around 1.4150 =
after BoE Governor George today tried again to talk down the currency. Geor=
ge said sterling strength exacerbates the imbalances the central bank would=
 like to correct. Therefore, a fall would help the BoE do its job to get th=
e economy on one track again.  Usually central bankers like a strong curren=
cy because it allows for lower interest rates and flexibility on monetary p=
olicy. But with RPIX running near their target of 2.5%, George appears more=
 concerned with the UK's two-speed economy. He repeated that "unbalanced gr=
owth better than no growth" for the UK, but warned that there is a risk tha=
t consumer spending could moderate sharply. Therefore, sterling remains wea=
k after back-to-back surprise declines in UK retail sales were seen as a si=
gn that consumer spending could have peaked last year, which stands in shar=
p contrast with the upbeat outlook for the US. Although risks to a sharp fa=
lloff in consumer spending worry the BoE and markets, the proactive stance =
of the MPC pleases the market more than the conservative approach of the EC=
B. EUR/GBP was little changed around 61 pence.  Yesterday's downward revisi=
on to UK GDP showed the economy was flat in Q4, down from a preliminary est=
imate of 0.2% growth. The revision caught traders off guard, but did not pr=
ovoke a break of key support at 1.4140. Follow up support is viewed at 1.41=
0 and 1.4075. Upside capped at 1.4260, 1.430 and 1.4345.  Meanwhile, USD/JP=
Y fell to a day's low of 133.57 in early London trade amid profit taking af=
ter encountering strong resistance around the 135 area overnight and a rema=
rk from Japan's top financial diplomat that the dollar was unlikely to drop=
 sharply. Repatriation concerns also limiting dollar gains, but with repatr=
iation poised to slow near the end of March and net outward investment to r=
esume thereafter dealers expect to see further yen weakness in the weeks to=
 come allowing USD/JPY to target 140 once the 135.00/20 major resistance ba=
nd is broken. Upside capped at 134.70/85 and strong resistance at 135.15. S=
upport holds at 133.50, 133.20, 133.0 and 132.50.  The Bank of Japan's deci=
sion to increase its outright JGB purchases to one trillion yen a month fro=
m 800 billion also had an initial supportive effect as it was seen easing f=
unding pressures next month. But the yen's gains evaporated as markets saw =
little hope in the Japanese government's anti-deflation package.  The yen s=
hould not fall too much from the increase in liquidity even though it is su=
pposed to mean a weaker yen because there is more of the currency circulati=
ng. Instead, since increasing liquidity in Japan is ineffectual amid struct=
ural barriers causing rampant deflation and lack of demand the yen has resp=
onded less and less to recent increases in liquidity, because it is not lea=
ding to inflation and therefore not diminishing the value of the yen.  Desp=
ite BoJ Governor Hayami's remark that today's easing was not politically mo=
tivated, Hayami has made public his desire now for the government to inject=
 public funds into the troubled banking sector. Whether there was a quid pr=
o quo agreement remains to be seen. PM Koizumi's anti-deflation package avo=
ided any concrete plan to rescue banks but Hayami worries that without a re=
capitalization Japanese banks will be threatened with losing international =
banking licenses because their capital ratios have fallen to below internat=
ional standards.  Government has tried to avoid a publicly unappealing tax =
payer fund injection, instead opting for creating a floor under asset price=
s which will keep banks capital adequacy ratios above the 8% limit set by t=
he BIS. But an injection of funds would allow banks to write off non-perfor=
ming loans and improve their balance sheets. Therefore, the government's pl=
an is seen as a  muddle through  and more risky for the markets.   =09[IMAG=
E] Audio Mkt. Analysis USD Tempered by Greenspan's Cautiousness       Artic=
les & Ideas  Goodbye Hope, Sayonara Yen   Will Greenspan & Data Overcome En=
ronitis?       Articles & Ideas Forex Glossary   Economic Indicators   Fore=
x Guides   Link Library      [IMAGE] =09
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