by Darko Pavlovic ///The yen, little changed from Friday trading vs. the dollar is likely to fall after the release of BoJ quarterly Tankan survey that will likely show a reading of minus 18 in June from minus 5 in March, the lowest since September 1999. The yen has fallen 4.6% against the dollar in June on market concerns that Japan is falling into recession as well as on the potential US approval for weak yen. US President Bush and Japanese PM Koizumi met over the weekend but they did not discuss monetary policy nor the level of the yen. But Koizumi said that he will prevent Japan from causing a global financial crisis, as the US and European government show concern over the no. 2 world economy. Bush pledged his full support for the structural reforms and ask for radical measures to boost the ailing economy. Bush and Koizumi also agreed to set up a new framework of bilateral consultation this fall to strengthen economic collaboration and ease trade friction. Nihon Keizai Shimbun survey of 30 major industries showed that manufacturing sector is visibly slowing down due to sluggish demand for memory chips and mobile phones both in the US and Europe. Last week Japanese Finance Minister Shiokawa expressed concern about the weakening yen and said that he preferred a stable currency. Resistance is seen at 125.0, 125.60 and 126.10. Support holds at 124.20, 124.0 and 123.70
The euro is trading around $0.8499 rebounding from its lows of $0.8433 on Thursday after German Chancellor Schroeder on Friday indirectly called for the ECB to cut interest rates. Schroeder noted that 2001 inflation was just over 2% and well below 3% thus implicating price stability. Despite the deterrent to an interest rate cut, such as the growth in M3 money supply to 5.4% in May from April's revised 4.8%, economists predict a rate cut late in the summer as inflationary pressures decrease. ECB's Christian Noyer remarked that for now, it is still valid to say M3 poses no price risks, although he expressed the need to view the M3 data with caution. Noyer repeated the ECB expects Eurozone inflation to decline over the rest of 2001, with inflation below 2% in 2002. Furthermore, Noyer reiterated Eurozone 2001 growth to be in line with the 2-2.5% trend potential. Markets expect the ECB to keep its monetary policy unchanged on its Thursday meeting. The IMF said on Friday that the Euro remained undervalued, even though the Euroarea economy has weakened significantly. The IMF expects the Eurozone economic situation to get better over the next year. IMF noted all signs points to continued restraint in underlying inflation in Euroarea, and in light of the downside risks, the IMF stated that the scope for further interest rate easing in the Euroarea is emerging. Resistance is seen at 85.0, 85.50 and 86.0. Support stands at 84.30, 84.0 and 83.50.
This week, the key US economic indicators include personal income and consumption, NAPM survey, NAPM non-manufacturing, and the June Labor market report. Major data releases from the Eurozone consist of PMI, the Euroarea business and consumer survey, unemployment, the INSEE household survey, the Euroarea business climate indicator, services PMI, German manufacturing orders, and France's final Q1 '01 Real GDP. The major event in the Eurozone is next Thursday's ECB meeting and press conference. Highlights from Japan are the Tankan survey and the Indices of business conditions.