Summary: The dollar and euro climbed against the yen yesterday. As Japanese confidence in their economy grows, Japanese wealth ventures abroad looking for investments. Yesterday, a Japanese economic report showed business sentiment among small and midsize companies improving, suggesting the country's economic recovery has spread beyond large firms. The dollar was also the beneficiary of a strong stock market and higher crude prices, both potential signs of inflation, which would preclude a Fed interest rate cut, which would in-turn damage the dollar. However, the dollar lost some of its initial gains late in the day after two U.S. senators cancelled their plans to have the senate vote on tariffs on Chinese-made goods in order to strongarm the Chinese into dealing with their undervalued yuan, one of the main causes for China's massive trade surplus with the U.S.
Related links: Full WSJ article • Japanese Business Sentiment Highest Among Large Co's • Paulson Wants Even More Flexibility in Yuan • The Paulson Effect: China Hawks in Senate May Delay Vote • China's Latest Attempt to Cut Its Trade Surplus • Will Debt Payments Drag Down GDP or the Dollar? • U.S. Trade Deficit: Not as Ominous as it Sounds • Consumer Confidence is Helping the Dollar
Potentially impacted stocks and ETFs: Euro Currency Trust ETF (FXE), iShares MSCI Japan Index ETF (EWJ)
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