LONDON (AFX) - The yen remained under pressure against major currencies in midday trade with the Japanese government's stimulus package to kick start the economy seen largely toothless amid the political uncertainty plaguing the country, dealers said.
Still ahead is the afternoon's U.S. non-farm payrolls which may jeopardise the dollar's strength, should the data prove much weaker than consensus forecasts. Conversely, any sign of strength may bolster the dollar, they said.
"The yen remains in focus although there has not been a rapid decline," Razia Khan, economist at Standard Chartered said. There was a small up tick on the yen which did not last very long, she added.
Despite assertions to the contrary from key officials, the market still believes the Bank of Japan and the Ministry of Finance remain split over the handling of the economic situation, she said, adding that the political rift is worsening the overall outlook for Japan. There is still talk of Japanese Prime minister Yoshiro Mori resigning, Khan said.
The Japanese government today announced a package of measures which analysts largely dismissed as insufficient.
Turning to the key U.S. labour market data, scheduled for release at 1:30 pm UK time, Divyang Shah, economist at IDEAglobal.com said the market has been gradually pricing in a weak outturn. "So the risk is more on the upside, if the numbers are not as weak as expected," he said.
A stronger number will knock the euro off its perch, possibly to as low 0.9280 usd, he added.
The euro was well bid, partly due to the yen's weakness all around, Shah said.
Sterling drew support from the steady euro to hover just under 1.47 usd with 1.50 usd in sight if the U.S. labour market data shows a sharp decline, Shah said.
There was little impact from the weaker-than-expected UK January industrial and manufacturing production numbers, he said. "It is too early to tell from this one piece of news if the U.S. slowdown is already affecting the UK," he added.
However, Shah noted that independent forecasts for euro zone growth have been cut, which in turn means that growth in the UK may be under pressure.
Economists taking part in the European Central Bank's Survey of Professional Forecasters now expect euro zone GDP to grow 2.7 pct this year, down from the 3.1 pct estimated in the previous survey.