Currency markets shift focus away from war (page 3 of 3)

Fall in stocks would keep alive expectations of Japanese authorities intervening to stem any signs of export-damaging strength in the yen.

Range for the week: 117.50 - 122.50

Sterling

Sterling started the week under pressure due to dollar supportive news. Better than expected U.K manufacturing data was not enough to change the market's sentiment about the economy.

Data showed manufacturing output in Britain staged another surprise rise in February, beating analyst expectations of a small decline from the previous month. Manufacturing output, which accounts for a fifth of the economy, rose 0.3 percent in February from January. Financial markets were little affected following the U.K. budget announcement for the year 2003 / 2004.

British Chancellor of the Exchequer Gordon Brown downgraded his forecast for U.K. growth in 2003 to 2.0 - 2.5% from the previous estimate of 2.5 - 3.0%. Brown raised projections for government spending to 27 billion pounds from 24 billion, raising concerns that the government could see deterioration in its fiscal discipline.

Later in the week Sterling climbed higher versus the dollar due to worries that the U.S. economic outlook may not be that promising. Additionally, Sterling found support from waning prospects of early British entry to Europe's monetary union. It looks increasingly unlikely that Blair will hold a referendum during his current term in office on merging Sterling with the euro.

Bank of England decision to keep the interest rates unchanged at 3.75 percent provided extra support for Sterling, allowing it to maintain the yield advantage over the dollar. U.K. data due for next week include U.K March PPI on Monday, U.K March RPIX on Tuesday and U.K March employment due on Wednesday. RPIX, which excludes volatile home loan payments, rose by 3.0 percent year-on-year in February, up from 2.7 percent in January. The Bank of England targets PRIX inflation at 2.5 percent.

Range for the week: $1.5500 - $1.6000