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The yen rose today vs. the dollar and the euro as Japanese investors continue to repatriate their funds ahead of March 31, the end of fiscal year. Some big Japanese companies like Sony and Toyota took the opportunity of last week's yen's fall vs. the dollar to boost the value of their earnings ahead of book closure in Japan. The yen also gained against the dollar after comments from Federal Reserve Bank of New York President McDonough, who said the dollar is stronger than economic fundamentals worth. It is likely that next week the yen will continue to fall vs. the dollar, as economic fundamentals continue to deteriorate and on recent market disappointment that the second part of government measures to pull out the ailing economy may not come as early as in April, as promised. A new draft proposal from three ruling parties about anti deflation packaged would be based on three pillars: reform of the tax system, legal deregulation and fiscal investment and loan program to help the smaller businesses. A new proposal would be submitted as early as next week. In order to encourage financial institutions to dispose more of bad loans the FSA will ask for more unified and stricter measures Currently, the agency is conducting special inspections of loans extended by large banks to borrowers categorized as being in financial trouble.The BoJ minutes showed that the board voted 8-1 to keep monetary policy unchanged at its meeting on Feb. 7-8. The decision surprised markets, which expected the BOJ to increase the size of its monthly Japanese government bond purchases. 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 87.60 after New York Fed President McDonough's comment that the dollar might be slightly overvalued. Earlier in the European session, the single currency had been undermined by the marginal improvement in the current business conditions of the German Ifo survey to 76.9 in March from the previous 76.8, even though the headline business climate indicator rose to its highest level in 11 months to 91.8 in March from the previous 88.7. The business expectations component of the Ifo also jumped to 106.3 in March from 101.0, but detractors pointed out that in spite of the optimism for the future, current conditions were not showing much improvement. Furthermore, Ifo economist Nerb said today that the strong rise in the climate index in March does not mean a recovery is certain because he does not see expectations will continue rising at such a pace. Separately, the ECB's Issing said he sees Q2 Eurozone inflation below 2% depending on oil prices, adding that there are no risks to euro inflation since on balance the risks are to the upside. Resistance is seen 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 viewed at 87.55, 87.0 and 86.80.
The US economy got a fresh boost of positive data after consumer confidence hit its highest level since August 2001 to 110.2 in March from the previous revised 95.0, defying analysts' forecasts for a smaller rise to 98.8. The US Present Situation Index forged ahead to 111.5 in March from the previous revised 96.4, posting its largest 1-month jump in 25 years. Top White House Economist Hubbard said he expected Q1 US growth would be "very very good" and he added that he could "esaily see" 3.5% US growth in Q2 and Q3.
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. Philadelphia Fed President Santomero is scheduled to speak to the European Banking and Financial Forum tomorrow. Major economic data from the Eurozone consist of German import prices, Euroarea M3, French INSEE industry survey, Italian PPI, French unemployment rate, French PPI, and Italian CPI. UK highlights comprise GDP, balance of payments, nationwide house price index and the Gfk/EU consumer confidence survey. The main economic releases due from Japan are commercial sales, consumer prices, household survey of expenditures, labor force survey, industrial production, housing starts and construction orders.