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At 4:30:00 AM UK Feb MO y/y prov sa (exp n/f, prev 7.8%) UK Feb MO m/m prov sa (exp n/f, prev 1.1%) At 6:00:00 AM E-12 Feb Consumer Sentiment (exp -10.6, prev 11) E-12 Feb Overall Economic Sentiment (exp 99.1, prev 99) E-12 Jan PPI m/m (exp 0.3%, prev -0.6%) E-12 Jan PPI y/y (exp -0.8%, prev 2.1%) E-12 Feb Business Sentiment (exp -11.9, prev 14)
The dollar added to last week's losses against the yen and fell to a 2-week low of 132.64 after tripping stop loss orders around 132.80 in Tokyo trade. USD/JPY encountered further weakness as corrective yen strength builds ahead of year-end book closings on March 31. European majors were also slightly stronger against the dollar, but losses seen temporary with robust US economic data giving the dollar needed support.
Helping the yen soar nearly one percent against the dollar this morning was the Nikkei's 638 point, or 5.9%, rally to a 6-month high of 11450. Investors were hopeful that that major banks such as Mizuho Holdings largest bank by assets - have stepped up efforts to resolve their bad-loan woes. But buyers were also spurred on by tougher regulations on short-selling introduced last week to help put a floor under Japanese share prices. Moreover, many of the short sellers borrowed in yen and had to repay in yen, which boosted the currency, dealers said. However they expect any gains to give way to selling in the new fiscal year in April which would increase the chances of a public fund injection into troubled banks.
Financial Services Minister Yanagisawa recently told a government economic panel last week he wanted to announce results of ongoing special inspections into the country's banks as early as possible. He said mid-April would be one target. Yanagisawa also said Japan's banking industry should dispose of its bad loans as early as possible regardless of the government's target of ridding them in two to three years.
Dealers now say that another wave of repatriation could be in store as investors fear a credit crunch at the end of March 31 FY-book closing. Japanese repatriation flows in January brought an enormous 3.3 trillion yen back home. This was a major reason the yen was able to fend off further losses. But with repatriation poised to slow near the end of March and net outward investment to resume thereafter dealers expect to see further yen weakness in the weeks to come allowing USD/JPY to target 140 once the 135.00/20 major resistance band is broken. Upside capped at 133.0, 133.50 and 133.70, 134.00/10, 134.70/85 and strong resistance at 135.15. Support holds at 132.50 and 131.80.
EUR/USD rose to a day's high of 86.66 but remains weakened by last week's fall to a 3-week low of 86.25. Traders took profit in the dollar's gains on Friday and were not encouraged by Eurozone prospects. Sentiment is again turning bearish, but only a move through 86.30/15 on its way to 85.63 low would put the euro back in full bear mode. Support is seen at 86.30, 86.15, and 85.60. Resistance is viewed at 86.60, 87.10, and 87.85.
GBP/USD tried to add to Friday's recovery from a 3-week low of 1.4110 but only reached a high of 1.4218, lower than Friday's high of 1.4230. Sterling benefited from UK February manufacturing PMI which rose unexpectedly above the 50-mark last Friday indicating manufacturing has recovered from yearlong contraction. However, sterling is likely to remain weakened by EMU expectations and the fact that BoE Governor George again tried to talk down the currency since sterling strength exacerbates the imbalances the central bank would like to correct. The bank feels a downward correction would help the BoE do its job to get the economy on one track again. Resistance seen at 1.4230. Support seen at 1.4180, 1.4150.
Key consumer and business data from the Eurozone is due today at 6:00 AM from the European Commission. The surveys are expected to show only a slight improvement in consumer and overall sentiment, but a large rise in business confidence as industry recovers from its recession, but consumers were held back by apprehension with using the euro in January.
Looking ahead, major data due from the US consist of the non-manufacturing ISM PMI, factory orders, productivity, consumer credit, and the labor market report.