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http://www.forexnews.com/NA/default.aspYen Surges Against Dollar and Euro by Jes Black
At 10:00:00 AM US Feb Factory Orders (exp 1.5%, prev -0.7%) US Mar Chicago PMI (exp 61.0, prev 63.6) At 3:25:00 PM US Fed Governor Gramlich Speaks
The yen rose to a new 3-year high against the dollar at 103.45 and a 4-month high of 126.63 against the euro. The notable absence of Japanese intervention this morning confirms the past week’s speculation that the Ministry of Finance sought to quell is yen selling measures. The dollar also hit a new two month low against the Canadian dollar, which has risen 5 consecutive days in a row, its longest streak since May, 2003. But the euro was little changed from overnight highs, trading just above 1.22, as concerns over Eurozone growth and a potential rate cut by the ECB weigh on the single currency.
Eurozone Inflation in Check, Rate Cut Could Come in June
With inflation in check at 1.6% in March, the third consecutive month below the ECB's limit of 2%, a rate cut could come as early as this June according to traders in the futures markets. Futures for the June 3-month yield fell to 1.85%, from 2%, the ECB’s rate, earlier this month. Therefore, a rate cut at this week's meeting on Thursday would be a surprise to the markets who are only looking for guidance by the ECB that a cut is coming in the future if domestic demand continues to stagnate.
Gold Rises to $425, Silver Nears $8 an Ounce
Precious metals refused to follow the EUR/USD lower this month and instead rallied to within critical resistance levels. Gold rose back above its 1996 peak of $420 for the second time this year, and is within 1% of new 13 year highs.
More importantly, gold priced in euros is knocking at key resistance of 350 euros per oz of gold, a level that has capped all gold/euro rallies for the past three years. A move above here would likely spell trouble for all countries as it would indicate that either inflation was back on the rise or that investors were losing confidence in both the dollar and euro as currencies. Silver rallied $1.5, or 25% since February and has now surpassed its 1998 highs this month, but is in the throws of a parabolic rise which may bode ill for the metal in the coming months if the dollar were to maintain its rally.
Data today include February factory orders and the March Chicago PMI survey. Factory orders are expected to bounce back from a 0.7% decline in January while the March PMI survey is expected to decline to 61.0 from a robust 63.6 last month.
http://quote.bloomberg.com/apps/news?pid=10000006&sid=aU1TFN6MJ3VI&refer=homeYen Rises to Four-Year High; Japan Signals Fewer Currency Sales
March 31 (Bloomberg) -- The yen surged to a four-year high against the dollar in New York after a government report showed Japan is reducing sales of its currency as economic growth accelerates.
Japan sold 4.7 trillion yen ($45.2 billion) in March, less than the average for the prior two months. Record sales in the past year limited the yen's gain, helping exporters and spurring the fastest economic expansion in 13 years in the fourth quarter. The central bank's Tankan survey tomorrow may show business confidence is improving, economists said.
``As the Japanese economy picks up and the stock market recovers, it will probably be more difficult for the Japanese government to justify intervention,'' Yukihiro Sato, chief financial officer of Mitsubishi Electric Corp., said in a telephone interview in Tokyo.
The Japanese currency strengthened to 103.96 at 8:02 a.m. in New York from 105.77 late yesterday, according to EBS prices. It gained to as much as 103.40 and is heading for a third straight quarterly increase. The yen also rose to 127.04 per euro from 128.70. The Nikkei 225 Stock Average and Topix index had their biggest fiscal-year gains in 31 years.
The Nihon Keizai newspaper on March 9 reported the Bank of Japan had sold 3 trillion yen since late February. Today's figure ``indicates that most of the intervention was at the beginning of the month,'' said Kamal Sharma, a currency strategist in London at Dresdner Kleinwort Wasserstein.
The yen is moving toward 100 per dollar, said Paul Chertkow, head of currency research in London at Bank of Tokyo-Mitsubishi Ltd. Should the Tankan survey show rising confidence, ``the investment flows into Japan are bound to continue.''
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ECB Rate Decision
The euro rose against the dollar on expectations the European Central Bank will refrain from cutting its key interest rate tomorrow. All but two of the 36 economists polled by Bloomberg News said the bank will keep its rate at 2 percent when policy makers convene.
Versus the dollar, the euro was at $1.2219, compared with $1.2173 yesterday.
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Jobs Picture
The dollar's decline against both the euro and the yen was furthered by expectations the Federal Reserve will keep its target rate at 1 percent this year. Jack Guynn, president of the Fed's Atlanta branch, yesterday said hiring may be delayed, suggesting policy makers will wait before raising the key rate from the lowest since July 1958.
A report tomorrow may show the U.S. added 120,000 jobs this month, compared with a gain of 21,000 in February, according to the median estimate in a Bloomberg News survey of 71 economists.
Payrolls on average have grown by 61,000 workers over the last six months, compared with an average of 207,000 a month during the comparable period after the 1990-1991 recession. ``We've haven't seen the payroll growth that would make people think a rate hike is imminent,'' Yetsenga said. The dollar may fall to 100 yen in the second half of the year, he said.
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Still Present
The yen's rise may be tempered by concern Japan will sell its currency to avoid excessive gains.
``It's desirable that foreign exchange rates move in a manner reflecting fundamentals of economies,'' Finance Minister Sadakazu Tanigaki said to reporters in Tokyo. ``Otherwise we must take action as necessary'' in currency markets. He declined to comment on the yen's level.
``If the yen falls below 105, there are still risks to the Japanese economy,'' Satoru Ogasawara, a Tokyo-based strategist at Credit Suisse First Boston, said in an interview. ``We're still expecting the MOF to be in the currency market, but not to push up dollar-yen like in early March.''
The BOJ's Tankan index of confidence among large manufacturers probably rose to a three-year high of 10 in March from 7 in December, according to the median of 40 forecasts in a Bloomberg survey of economists. Confidence among large non- manufacturers probably rose to 4 from zero. A reading above zero means optimists outnumber pessimists.
http://www.forbes.com/markets/newswire/2004/03/31/rtr1318181.htmlFOREX-Yen storms higher, hits four-year peak vs dollar
LONDON, March 31 (Reuters) - The yen smashed through a key psychological barrier to hit a four-year high against the dollar on Wednesday as investors sensed Japan was scaling back yen-selling intervention going into the new fiscal year.
The yen rose at breakneck speed after hurdling 105 per dollar, previously considered the tolerance threshold for Japanese policymakers keen to prevent a strengthening yen jeopardising the country's export-led recovery.
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"Economic fundamentals are pointing to further yen strength and it will be harder for Japan to justify intervention."
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A Reuters poll forecast the survey would reveal heightened optimism among big manufacturers who are benefiting from robust exports and high-tech demand.
"There's a lot of optimism about the Japanese economy. The Nikkei had a good run over the last 12 months and we have the tankan overnight which is expected to show further improvement," said Ryan Shea, senior international economist at Bank One in London.
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"The line in the sand at 105 has gone, clearly, but I wouldn't be surprised to see another one above 100," he said.
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EURO RECOVERS FOOTING VS DOLLAR
The euro was up half a percent against the dollar at $1.2225 , slightly below earlier one-week highs but up almost two cents from this year's low hit on Monday.
News of a fire at a BP Plc refinery in Texas bolstered the euro against the dollar in early trade, particularly after the FBI last week warned of a security threat to refiners in that area.
BP said the cause of the fire was unknown but added it did not appear to have been started intentionally.
Dealers said fading expectations of an interest rate cut from the European Central Bank on Thursday were also supporting the single currency.
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The Chicago purchasing managers' index, due at 1500 GMT, is forecast to show a fall to 61.5 in March from 63.6 in February. U.S. factory orders, due at the same time, are expected to to show a rise of 1.5 percent in February after a 0.5 percent decline in the prior month.
However, reaction to both sets of data may be muted ahead of Friday's key U.S. payroll report, dealers said.
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