ASIA SUMMARY

Asia saw JPY crosses break through the NY session highs as comments from the meeting between Paulson and Chinese officials were viewed as benign to the carry trade. USD/JPY grinded higher and maintained above the 121.60 area while EUR/USD traded steady around the 1.3450 area. Also, 163.60 area resistance in EUR/JPY has now become support and the pair could look to test the 164 level again. Notably, GBP/JPY is firmly above 240 and could look to test multi-year highs.

The meeting between Paulson and Chinese government officials continues tomorrow in NY as well. Interestingly, the Yuan was fixed at its highest value today since the revaluation in July 2005. It seems clear that China is looking to move their currency and economy into a free market system albeit at their own pace.

Looking forward, we have Japanese Consumer Price Index on Thursday evening (NY time) and this release could set the pace for the JPY in the near term. Japanese government officials have been quiet this week despite the JPY crosses trading near multi-year highs. With inflation one of the main factors in the decision to increase interest rates, any departure from expectations could be a deciding factor for Japanese monetary policy in the near term.

Upcoming Data Release (UK Session):

Germany: (2am EDT) German Finance Ministry publishes its May report.

UK: (4:30am EDT) Bank of England minutes.

EC: (5am EDT) Month over month seasonally adjusted Industrial New Orders expected 1% vs. previous -.7%.