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  Interest Rates   US: Japan: Eurozone: UK: Switzerland:   2.0%  0.15%  3.2=
5%  4.0%  1.75-2.75%       [IMAGE] =09 [IMAGE]  Dollar Regains Momentum as =
Confidence in US Outlook Rises  November 19, 7:00 AM: EUR/$..0.8793 $/JPY..=
123.38 GBP/$..1.4211 $/CHF..1.6660  Dollar Regains Momentum as Confidence i=
n US Outlook Rises by Jes Black  At 8:30:00 AM US Oct Housing Permits (exp =
1.510 mln, prev 1.524 mln) US Oct Housing Starts (exp 1.520 mln, prev 1.574=
 mln)  The dollar added to earlier gains and soared to fresh 3-month high o=
f 123.49 yen and a 3-1/2 week high of $1.4213 against the pound in European=
 trade as markets anticipated renewed enthusiasm for a V-shaped recovery in=
 the US. After falling to profit taking on Friday, following the largest dr=
op in US industrial production in 11 years to -1.1%, the dollar regained it=
s momentum as investors showed they still prefer the future outlook for USD=
 over other major currencies. The dollar index is now at highs last seen in=
 August, at 116.89, which put the euro under pressure at a day's low of $0.=
8789.   EUR/USD peaked around 88.60 on Friday, but was unable to hold onto =
gains above 88.40, which led the pair back towards the 88-cent level on Mon=
day. Last week, the euro flirted with 88 cents, but maintained above key re=
sistance around 87.45. The Bundesbank November monthly report indicated as =
expected that Q3 growth was flat for the Eurozone's number one economy. Fla=
t growth in Q2 also contributed to a year on year growth rate of around 0.2=
5%, down from 0.6% in Q2, thus showing that Germany is very close to a tech=
nical recession. EUR/USD edged back below 88 cents, but did not trigger sto=
p loss orders and held to a day's low of 87.89.  Traders anticipate Wednesd=
ay's release of Germany's Ifo business climate index (an estimate of German=
 growth, which accounts for about one-third of the Eurozone) to recover sli=
ghtly in November to 86 after plunging to 85 in October from 89.5. Markets =
also await Eurozone industrial production figures for September, which like=
ly dropped since French and Italian outputs declined. Disappointing results=
 will most likely spark renewed selling in the euro. Support is seen at the=
 88-cent figure, backed by 87.70 and 87.45. Resistance is seen at 89.0, 89.=
30 and 89.50.  USD/JPY rose to a new 3-1/2 week high of 123.49, following a=
nother grim assessment of the Japanese economy by the Bank of Japan in its =
November report. "Adjustments in economic activity are becoming severe, as =
the substantial decline in production is beginning to have an adverse effec=
t on private consumption through decreases in employment and income," the B=
oJ said in the monthly report. This was the sixth straight month the Bank c=
ited weakening private consumption and falling corporate profits at banks a=
nd the deterioration in the manufacturing sector will add weakness to domes=
tic demand, it said.   Following another downgrade in Japan's economic outl=
ook, it now appears that FY02 tax revenue will probably be revised down by =
Y2.8 trln from Y49.6 trln, according to the MoF. Therefore, sticking to PM =
Koizumi's important reform to limit JGB issuance to 30 trillion yen in FY02=
 will be difficult. In order to achieve this, further expenditure cuts will=
 be needed, which will likely find strong opposition within Koizumi's own L=
DP party. Japanese FinMin Shiokawa maintained that the government would lim=
it new issuance to Y30 trln, but more LDP lawmakers are now openly requesti=
ng further fiscal stimulus. Aggravating the situation is that tax projectio=
n for FY02 is most likely to be revised down further.  Adding pressure to t=
he yen is the fact that the BoJ decided by majority vote to keep monetary p=
olicy unchanged last week. It had eased in August and again in September bu=
t has since been keeping a wait-and-see stance. Interest rates are still ne=
ar zero and its liquidity supply in the money market exceeds its stated tar=
get of 6 trillion yen. Moreover, another possible move by the BoJ would be =
to purchase more foreign bonds, which would lead to a substantial fall in t=
he yen.   Rumor of selling interest in USD/JPY by exporters around 123.20 c=
apping gains. Technical resistance around 123.35 also limiting upside poten=
tial. Meanwhile, with little room for improvement in the Japanese economy u=
ntil late next year, most market watchers see the yen heading for 125 now t=
hat it has successfully breached the 123 mark. Resistance is seen around 12=
3.35/45. But USD/JPY support is expected to hold at 121.95/122.00 followed =
by 121.40/50, with any pullback towards the latter level seen as a buying o=
pportunity, dealers said.  EUR/GBP rose to a fresh high of 62.05 but is exp=
ected to stay rangebound at around 61-62 pence after recovering from recent=
 10-week lows around 60 pence. When that cross is steady, GBP/USD shadows t=
he movements in the more dominant EUR/USD. So far, cable has fallen to a ne=
w one-month low of 1.4210 as it continues to suffer further declines since =
last Wednesday's inflation report by the Bank of England signaled a shift i=
n market sentiment. The market is now more aware of the weaknesses the UK f=
aces due to the internal and external imbalances in the economy. BoE's King=
 pointed out that those imbalances might lead to a weaker pound. Moreover, =
the Bank appears more concerned about future inflationary pressures given t=
hat interest rates are now at a 40-year low. Therefore, interest rates are =
likely to be left on hold just as the labor market is showing its first sig=
ns of weakness, which will weigh on the pound. Major support now stands at =
1.4195 after GBP fell below key levels of 1.4250 and 1.4230.  Meanwhile, US=
D/CHF rose to a session high around 1.6673 after falling to a low of 1.6536=
 on Friday. Helping the dollar were comments from Swiss National Bank Chair=
man Jean-Pierre Roth who said the outlook for the U.S. economy is uncertain=
 but could improve if the war in Afghanistan ended. "The uncertainty is cur=
rently unusually great. But there is a certain chance now that the developm=
ents could come out better than feared. If and when it is true that the war=
 in Afghanistan is over, that could give some important psychological impet=
us," he said. "Switzerland is so dependent on world trade that of course we=
 cannot escape from developments abroad," he said. Moreover, the SNB aimed =
to conduct monetary policy "so that our interest rates are as low as possib=
le in order to provide relief for the economy, but so that at the same time=
, we do not endanger price stability," he added. Inflation in Switzerland i=
s below one percent.  On Friday, Roth said in an interview with the Financi=
al Times that the Swiss franc's role as a safe-haven currency is declining =
because of the emergence of the euro. Thus Roth felt more at ease that the =
Swiss franc is reverting to the status of a normal currency as it becomes "=
less important as a financial asset". The Swiss National Bank has been dism=
ayed by the appreciation in the Swiss franc as investors sought shelter ami=
dst recent political uncertainty, thereby prompting the central bank to cut=
 rates. Roth asserted that "if we were to face large capital inflows we wou=
ld have to respond through monetary policy and interest rates" because "it =
is an illusion to think that we have other instruments that we could use to=
 curb inflows". Upside capped at 1.6680 and 1.670. Support holds at 1.6535,=
 1.650 and 1.6480.  Today's US data is expected to show a decline in housin=
g starts as the slowdown in the general economy starts to outweigh the bene=
fits of record low mortgage rates. However, USD strength continues to stem =
from the belief that the US-backed war in Afghanistan is going better than =
anticipated and this is translating into a fall in uncertainty and a rise i=
n confidence. Accordingly, dealers anticipate further gains on Wall Street =
this week, which is adding to the dollar's buoyancy.   =09[IMAGE] Audio Mkt=
. Analysis Further Losses for GBP, EUR Steadies       Articles & Ideas  OPE=
C: The beginning of a price war?   Dollar Regains key Pre-Sept 11 levels   =
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