LONDON (AFX) - The yen was firm across the board in midday London trade, with investors' buying interest remaining in place due to current underweight Japanese assets positioning, dealers said. They added that fundamentals will reassert themselves and that Japan's current account surplus will support the currency within a 129-132 trading range. Should the yen stay below the 128 level against the dollar, the risk of Bank of Japan intervention would increase, they added. With little newsworthy data on the calendar, market activity was limited and expected to remain so until Wednesday's US retail sales data. However, strategists were optimistic the dollar would regain strength, not only as the substantial divergence on the economic performance between the US and the rest of the world becomes apparent, but as portfolio flows favour the US corporate bond market. Hans Redeker, a BNP Paribas strategist said investors were more risk-hungry than in the past and the corporate bond market was a very important segment, in this environment. Citing a warning by Grant Aldonas, under-secretary of commerce for international trade, that the US government's import duty could spread from steel to other sectors unless the European Union countries and Japan reflate their economies, Redeker said "this could be a negative event for the dollar." But the strategist highlighted that the currency's behaviour was driven by portfolio flows. "People are expecting a higher return of investment in the US. That in itself is a pretty bullish dollar assessment," he said. Redecker said strong US private credit demand in January and February was a good indicator for retail sales. He expects the data to provide further evidence that the US economy is moving out of its economic downturn. Meanwhile Adrian Schmidt, currency strategist at the Royal Bank of Scotland said the euro/dollar pair need to hold above the 0.8720 level to sustain belief in the upside. Analysts said that as long as there are no significant productivity gains in Europe, there is unlikely to be an improvement in corporate profitability. Additionally, said Redecker, in an environment of global overcapacity, an improvement in corporate profitability has to take place via cost structure adjustment. However, he said the rigid structure in place in Europe, when compared to the US, rendered it difficult to make these cost adjustments. Some interest will be centred on the US wholesales sales data as well as on the inventories numbers for January, both due out at 3.00 pm. This morning saw the release of producer prices and trade data in the UK. RBS' economists pointed out that, though there were higher oil prices and a weaker sterling/dollar exchange rate in February, base effects following last February's 1.3 pct rise meant that deflation in input prices will increase. And with output prices remaining subdued, they said that both argue against an early reversal of the Bank of England's interest rate cutting trend. Meanwhile, economists said the greater-than-expected improvement in the UK's global trade balance in January points to a recovery in manufacturing output figures, due out tomorrow. National Statistics figures released this morning showed the UK's global trade deficit narrowed in January to 2.592 bln stg from 3.140 bln the previous month as total exports rose 4.1 pct on the month. Also of interest will be the BRC sales monitor, due at 7.30 pm today. Expectations are for some moderation in annual sales values growth.