Iraq fears limit US dollar rally (page 2 of 2)

Data showed Japanese investors bought $1.67 billion in foreign equities in the week to April 2, backing up talk of fresh asset allocation overseas into the new fiscal year.

On the last trading day, the yen steadied against the dollar following early losses prompted by worries that the kidnapping of three Japanese civilians in Iraq could damage support for the government of Prime Minister Junichiro Koizumi.

A hitherto unknown Iraqi group, Saraya Al-Mujahideen (Mujahideen Brigades), released a video of the three hostages and vowed to "burn them alive" if Japanese troops did not leave Iraq in three days.

However, Koizumi said that Tokyo had no intention of withdrawing its Self-defence Forces from the southern Iraqi city of Samawa, where some 550 troops are involved in a non-combat mission.

Range for the week: 104.00 - 108.00

Sterling

Sterling dropped 1 pct against the dollar at the beginning of the week, hurt by strong U.S. data, which bolstered expectations of a sooner-than-expected interest rate hike by the U.S. Federal Reserve.

Sharp fall in Britain's manufacturing also pressured the pound. Surprisingly, manufacturing production also fell 0.6 pct during February from 0.2 pct in January compared with market's forecast of 0.4 pct rise.

As expected, the Bank of England's Monetary Policy Committee left interest rates unchanged at 4 pct.

However, speculation that BoE may hike interest rates, possibly as soon as its meeting in May, limited the pound's downward trend. The UK central bank has raised interest rates twice since November last year.

Range for the week: $1.8100 - $1.8600