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The dollar slipped to 133.20 yen after hitting a one-month high of 133.83 due to growing tensions in Middle East and uncertainty over oil prices. The yen was hurt after the Bank of Japan's quarterly Tankan survey remained unchanged at minus 38 and worse than market expectations of first improvement in 1-1/2 years. Nevertheless, the survey showed shine of hope as businesses indicated they were becoming more confident about the future outlook. Also contributing to yen weakness was the reversal of repatriation flows with the start of the new fiscal year. This was most clearly reflected in the latest CFTC IMM Futures report showing that investors were net short 4360-yen positions. Thus in the absence of encouraging economic signs in Japan and in light of the government and central bank's avoidance of enacting strict reform measures, analysts anticipate the yen will decline even further. The World Cup soccer tournament, which starts on May 31, could generate profits in the amount of 370 bln yen and boost the ailing economic outlook. According to Dai-Chi Life Research soccer tournament could push the GDP by 0.3% in April-June quarter. The MoF announced that the government's tax revenue in February fell 7.3% from the year-earlier level to 4.08 trillion yen, due to a reaction to overstated tax receipts on interest income in the previous year. The FSA's minister Yanagisawa said that there is no dispute between the BoJ and the government over public funds injections into banks. "Our theories are not that different but the way we state our ideas is," said Yanagisawa in an attempt to downplay his dispute with BoJ Governor Hayami. As the repatriation of Japanese funds home is over, and the beginning of new fiscal year started this week, the yen is likely to depreciate further vs. the dollar, given the weak economic fundamentals, but the current political crisis in Israel and rising oil prices could offset yen's fall as they are proven to be dollar negative. Upside capped at 133.85, 134.0 and 134.25. Support holds at 132.0, 131.70, 131.20 and 131.0.
EUR/USD is trading around 87.90 after rising to a 1-week high of 88.21 as the pair tailed the Swiss franc higher against the dollar, boosted as well by the single currency's advance against the yen. Separately, the euro is also likely finding support as the previous week's IMM futures data noted that speculators were net long 23,293-euro contracts in the period of March 20-26, marking its highest level since October 2001. However, the single currency's inability to capitalize on the considerable long positions suggests that the euro's gains will be capped in the near future. Upside capped at 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 87.0, 86.80 and 86.30.
Due to continuing tensions in the Middle East crude oil rose to a six month high of $26.88 a barrel on NYME, the highest closing price since Sept. 18. The prices are likely to go up until the situation settles down. The region holds two thirds of the world's oil reserves. Israel continues to keep Palestinian leader Arafat in home prison after suicide bombings at the Passover dinner killed 35 Israelis.
GBP/USD is trading around $1.4390 after hitting a 2-1/2 month high of 1.4429 in tandem with the surge in the European currencies against the dollar. Resistance is eyed at 1.4465, 1.450 and 1.4540. Support stands at 1.4250, 1.4220 and 1.420.
This week's significant US indicators include factory orders, ISM non-manufacturing survey, jobless claims, labor market report and consumer credit. Chicago Fed President Moskow will speak on Wednesday, followed by Richmond Fed President Broaddus and St. Louis Fed President Poole on Thursday, and Kansas City Fed President Hoenig on Friday. Eurozone economic highlights consist of Euroarea manufacturing PMI, labor costs, HICP, German PMI, French PMI, Italian PMI, PPI, Euroarea business and conusmer confidence survey, unemployment, ECB rate decision and press conference, retail sales, Services PMI, industrial production, German Services PMI, French Services PMI, Italian Services PMI, German manufacturing orders, Spanish industrial production and Dutch CPI. Major data releases from the UK comprise the Halifax house price index, Bank of England net lending, manufacturing PMI, CBI survey of distributive trades, purchasing managers survey for construction, nationwide house price index, purchasing managers survey for services, the Bank of England monetary policy decision, and the NTC/REC report on jobs. Key Japanese indicators are the trade balance, foreign reserves and the indices of business conditions.