By LARRY WEE
SENIOR CORRESPONDENT

OIL prices and equity indices around the world have this week continued to record impressive new highs, while the US dollar and yen have again been forced down to fresh multi-year lows.

Inspired by a fresh round of greenback-bashing following last Friday's horrible one per cent slide in June US retail sales, high-yield favourites like the pound and New Zealand dollar have led the surge to fresh US dollar highs not traded in 25 years or more. This, in turn, has catapulted currencies like the pound, euro and Australian dollar to fresh yen highs not traded in 15 to 16 years.

At this point though, we are starting to feel a bit uncomfortable that the proximity of important round-number targets on several fronts, and warnings of a volatile counter-trend correction, appear to have been blithely brushed aside.

Comments from the Bank of Japan last week have convinced some folks that it may well hike its short-term interest rate the next time it meets, on Aug 22-23. Despite that, the Japanese unit has suffered fresh lows in carry trade plays, as has the Singapore dollar.

The S$1.30 top for the Australian dollar was the first to get busted in early July, and this week it was the turn of the New Zealand dollar to clear S$1.20. Beyond those two, we came very close to clearing another two important psychological round-number tops yesterday - a S$2.10 euro and a S$3.10 British pound.

Down Under, meanwhile, New Zealand Finance Minister Michael Cullen yesterday repeated a warning that those who bet heavily on his currency will bleed when it corrects at some point. An expected rate hike next week has taken the New Zealand dollar up to within a cent of a 25-year high of 80 US cents - and propelled it above S$1.20 for the first time in more than two years.

Closer to home too, at least two of the round number targets highlighted here last week are believed to have held up only with the help of central bank support - namely, 40 Indian rupees and 45 Philippine pesos.

And further north, Beijing-watchers tell us that, after last week's impressive June trade surplus, they expect even more strong Chinese numbers on the growth and price fronts tomorrow - and thus more yuan highs as well.

And elsewhere yesterday afternoon, the US dollar revisited a December 2006 low of 1.1983 Swiss francs despite the latter's poor yield.

But in chart terms at least, the most closely watched support of all this week is probably the 80.40-60 area for a broader-based US dollar index which is thought to be based on key component currencies such as the euro, British pound, Canadian dollar, yen, Swiss franc and Swedish krona.

Bottom line: Watch out below if that 80 support becomes 80 resistance for the US dollar.

We understand that the euro makes up more than 50 per cent of the weightage in that currency basket. This would suggest that unless the euro clears US$1.38 and heads straight for US$1.40, and the greenback is forced below the important 120.50 to 121 yen area, that 80 support for the broader-based US dollar index might manage to hold off the US dollar bears for at least a little bit.

And if that indeed proves to be the case over the coming week, we would feel much safer looking for corrective yen strength to re-establish carry trade plays as we move into the holiday month of August - with an eye on the eventual upside targets of 170, 250 and 110 yen (or higher) for the euro, pound and Australian dollar respectively.

We would love, for example, to get a chance to see what happens back down at 165 yen per euro, 246.5 yen per pound, and the 104 to 104.50 yen area per Australian dollar.