//www.ananova.com//Major currencies were stable in midmorning trade as investors took to the sidelines ahead of the first anniversary of Sept 11, with concerns further attacks on the US may be launched, dealers said. They added that the dollar may see gains, particularly against the yen, if these fears prove unfounded, although worries that the US may start a war to topple Iraqi President Saddam Hussein will continue to keep the market on edge.
"People are refraining from having big positions ahead of Sept 11 and some are expecting a relief rally after," said Minori Takeuchi, foreign exchange analyst at the Tokyo branch of JP Morgan Chase. Sentiment on the yen remains negative due to concerns over the Japanese banking sector, although the local stockmarket and currency are being supported near term, partly due to expectations of fresh government action. "Foreign investors have a negative view of the yen because of the effect of the (recently weak) Nikkei on the banks," Takeuchi said.
"The banks need to reduce huge risk assets and, if they do this, they have to stop lending and we will have a lot of corporate bankruptcies," she said. "The Japanese government has been dragging its feet for many years. We have a lot of contradictory reports about the content but at the end of the day we will have something (from them)."
Takeuchi said this afternoon's machinery-orders data will be significant after disappointingly weak capital expenditure numbers in the Finance Ministry survey published last week. "Japanese machinery orders are important. Capex was one of the possible bright areas in the Japanese economy. If this weakens, maybe the recovery will come to an end," she said.
The euro appears to have a brighter outlook against the dollar, with speculation the European Central Bank may cut interest rates ahead of the US Federal Reserve, given weak data on the continent. "The ECB is not likely to move this week (but it) looks like the possibility is higher of an ECB rate cut ahead of the US," Takeuchi said, despite comments by ECB president Wim Duisenberg over the weekend.
"We regard the monetary policy stance as appropropriate for the time being," Duisenberg said. "Our answer is that there's no room at this stage for actitivism, neither on the fiscal nor on the monetary side." Investors will be closely watching scheduled comments this week by Fed chairman Alan Greenspan, as well as a meeting between US President George Bush and Japanese Prime Minister Junichiro Koizumi. Takeuchi said it is too early to take on face value the surprise fall in unemployment numbers from the US on Friday. "At this moment we are not sure that we should interpret this as a positive number. The series is very volatile and the initial claims numbers are weak. It should be taken with a grain of salt," she said.

Dollar
yen 118.57 unchanged 118.57
sfr 1.4869 up from 1.4864
Euro
usd 0.9804 down from 0.9805
stg 0.6294 down from 0.6298
yen 116.24 down from 116.26
sfr 1.4577 up from 1.4574