LONDON (AFX) - The dollar remained firm against the yen in early trade following the release of weak Japanese industrial output data and on fears that Japanese Prime Minister Junichiro Koizumi will not be able to overcome political opposition to his ambitious economic reforms, dealers said.
"The main story today is the decline of the yen, particularly against the dollar, due to poor industrial output figures and worries about Koizumi's reforms," Halifax economist Steven Pearson said. According to the Ministry of Economy, Trade and Industry, industrial output in June fell 0.7 pct month-on-month, the fourth straight month of declines, after a fall of 1.2 pct in May.
Dealers noted that the yen soon saw a reversal of its early gains against the dollar in response to the victory by the ruling Liberal Democratic Party in Sunday's upper house elections.
Elsewhere, the euro weakened on expectations that euro zone PMI figures due out this week will paint a gloomy economic picture, dealers said.
They said fears that the European Central Bank may not cut rates at its governing council meeting on Thursday are also putting pressure on the euro.
In the UK, sterling was weaker following Friday's release of poor preliminary second quarter GDP figures.
Again, market participants fear the Bank of England's monetary policy committee will not cut rates on Thursday at the conclusion of its two-day monthly meeting, dealers said.
They said conflicting signals from the UK government on its euro entry intentions are weighing on sterling.
Otherwise, dealers said there is no significant data from the US today but that the focus will be on tomorrow's US consumer confidence figures for July.