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As Japanese investors are ending repatriation flows from overseas ahead of the end of fiscal year on March 31, the yen begins to decline as investments flew out of Tokyo. The Japanese currency hit a 3-week low of 133.46 against the dollar and to a 4-week low of 117.07 against the euro as Nikkei fell to a three-week low today, weakening demand for the currency. In the week through March 15, foreigners were net sellers of Japanese stocks for the first time in three weeks.
IMM futures data reported that speculators were net sellers of the yen by 1,127 yen contracts last week after breaking a 9-week streak in the previous week where they were net buyers by 6,898 contracts. Moreover, market pessimism about Japan's economic conditions is likely to exacerbate the yen's likely tumble, particularly ahead of the April 1 release of the Bank of Japan Tankan survey that is expected to show slight improvement but reflect Japan's dismal economic state. The political dispute about the proposed tax reforms is heating up as economic minister Takenaka, sparked the debate on Sunday by outlining a broad shift in the importance from "neutrality" to encouraging economic activity in tax reform. The FSA's Commissioner Mori said that Japan's major banks are poised to secure capital ratios of about 10% on average at the March 31 fiscal year-end.Resistance is eyed at 133.50, 133.80 and 134.0. Support holds at 132.0, 131.70, 131.20 and 131.0. EUR/USD is trading around 87.65 as the dollar surrendered to downward pressure from the losses in stocks. The Dow tumbled 146 points to 10281 and NASDAQ retreated 38 points to 1812. In addition, the single currency received a welcome boost after ECB member Matti Vanhala said the current euro levels are tolerable and a stronger currency is not unwelcome. He added that he saw no interest rate hike consensus emerging in the ECB, though he concurred with Issing's analysis of Eurozone inflation risks. Nevertheless, the single currency had been weighed by a rise in German CPI to 1.8% y/y in March from the previous 1.7%. Analysts believe that upward price pressures in the Eurozone could cause the European Central Bank to raise interest rates to fight inflation, and this speculation is dragging on sentiment towards the euro since any monetary tightening would serve to inhibit growth.Data from the CFTC IMM report showed that speculators were net long 21,256 euro contracts in the week ending on March 19, marking its largest level in more than five months, thus explaining last week's rally in the single currency. Upside capped at 88.0, 88.40 and 88.70-- the 61.8% retracement of the move between the 90.63 high to the 85.63 low. Support is seen at 87.55, 87.0 and 86.80.
US Feb Existing Home sales declined by 2.8% to 5.88 mln from the previous 6.04 mln. Nonetheless, the White House's Hubbard commented that the housing data added to signs of a US recovery since the consumption remains strong. Tomorrow's release of US durable goods is forecasted to dip to 1.0% in February from the previous 2.0%, but remain in positive ground for the third straight month led by defense and aircraft orders. Core durable goods orders are seen to be flat after last month's gains.Markets will then assess the Conference Board consumer confidence survey due later in the morning. Economists estimate that the overall index will jump to 98.8 in March from the previous 94.1, mirroring the rise in the University of Michigan sentiment survey.
This week's key US indicators include new home sales, jobless claims, GDP, University of Michigan Confidence survey, Chicago Purchasing Managers Index, and personal income and consumption. Fed Chairman Greenspan will speak at the NABE conference on Monday, followed by New York Fed President McDonough who is scheduled to speak about US monetary policy on Tuesday. Major economic data from the Eurozone consist of Euroarea balance of payments, German Ifo business climate indicator, Italian retail sales, Italy's ISAE industrial confidence survey, Euroarea M3, French INSEE industry survey, Italian PPI, French unemployment rate, French PPI, and Italian CPI.