London, April 17 (Bloomberg) -- The dollar fell to a three- day low against the yen beforeU.S. economic reports expected to reinforce the view the world's biggest economy willweaken further in coming months. The dollar fell to 123.12 yen, from 124.52 late yesterday, before trading at 123.60.Against the euro, it strengthened to 88.20 U.S. cents, from 88.60 yesterday, amidconcerns about the weakening euro-region economy. The dollar has risen 7.8 percentagainst the yen and 6.9 percent against the euro this year. Traders will be watching U.S. consumer prices and industrial production figures todayto gauge the state of the economy. Retail sales and consumer sentiment reports lastweek, and Cisco Systems Inc. yesterday saying it will cut jobs and sales will missforecasts, showed the economy is still declining, analysts said. ``We're bound to see some more weak numbers,'' said Peter Stoneham, a seniorcurrency analyst at Thomson Global Markets. ``Cisco is more of the same. There isconcern the technology sector will drag the market lower.'' He sees 125 to 130 yen as``probably the top for the dollar.'' The U.S. consumer price index probably rose 0.1 percent in March after a 0.3 percentgain the previous month, according to a Bloomberg News survey. Industrial productionprobably fell by 0.2 percent in March, compared with 0.6 percent in February, aseparate survey showed. The reports are scheduled for 1:30 p.m. and 2:15 p.m. Londontime. Slower economic growth and falling earnings forecasts may hurt the dollar by lesseningthe allure of U.S. financial assets. ``We expect zero percent growth from the U.S. this year,'' said Lothar Hessler, aneconomist at HSBC Trinkaus & Burkhardt KGAA in Dusseldorf.
Cisco Effect
Cisco, the No. 1 maker of equipment to link computers, said sales will miss alreadyreduced forecasts and that it plans to cut 8,500 jobs. That may lead investors toabandon U.S. stocks, analysts said. Nasdaq 100 stock index futures fell 42 to 1586. ``There is caution ahead of the U.S. equity session,'' said Stephen Hannah, chiefeconomist at National Australia Bank. ``The Cisco factor is considerable. The sizemakes it more dramatic'' than other recent reports of weaker earnings and job cuts atU.S. companies, he said. The yen may have been boosted in recent days by policy makers' commentsthreatening central bank purchases of the Japanese currency should it extend its 15percent decline of the past 12 months, analysts said. ``Talking is enough to have an effect,'' said Hessler at HSBC. ``The BOJ will continueits open-mouth policy'' to stop the yen weakening, he said. Haruhiko Kuroda, Japan's vice minister of finance for international affairs, saidyesterday the nation wants to keep its currency in line with the economic outlook. Hesaid there's no reason for the yen to depreciate, the Financial Times said.
No Intervention
Sixteen analysts surveyed by Bloomberg News last week said they don't expect Japanto buy yen until the currency tumbles beyond 130 per dollar. The yen also gained after better-than-expected Japanese industrial production figures.Industrial output rose 1.1 percent in February from January, rebounding from a recorddecline the previous month and more than double the initial estimate of a 0.4 percentgain, the Ministry of Economy, Trade and Industry said. Still, Bank of Japan Governor Masaru Hayami said today that Japan will keep its near-zero interest rate policy. The BOJ yesterday cut its outlook for the economy for asecond month. ``Fundamentally there are no reasons for the yen to be stronger,'' said SonjaHellemann, a currency strategist at Dresdner Kleinwort Wasserstein. ``We're justseeing a little bit of U.S. weakness.'' The dollar may have risen this year as investors kept their money in the U.S. while theJapanese economy held on the brink of contraction and euro-region growth slowed,analysts said. The Fed's benchmark interest rate cuts of 150 basis points this year to 5 percent haveshown the U.S. central bank is prepared to take action to avert economic contraction,while the European Central Bank's lack of action threatens to hurt the euro region'sgrowth prospects, analysts said. ``We've actually changed our forecasts on the back of the ECB's lack of action lastweek,'' said Steven Saywell, a currency strategist at Citibank. ``The ECB is the onlycentral bank not to cut. It's that lack of flexibility which means it will be difficult for theeuro to rally.'' He sees the euro at 89 cents in one month, and 90 in three months. The slowdown in euro-region growth was reinforced by Royal Philips Electronics NV'sannouncement that it will probably lose money this quarter and plans to cut as manyas 7,000 jobs as demand slows for mobile phones and computers.