Pressure grows on the US dollar (page 2 of 2)

Speculation that the Bank of Japan may consider a shift in monetary policy due to improving economic conditions added support to the yen, as investor appetite for the yen grew stronger following further expectations of stronger economic data.

The yen was also supported by concerns over the pace of US interest rate hikes, which has hit rough waters in the light of recent US economic data, as many analysts have scaled back from initial expectations of aggressive Fed rate hikes.

As the week unfolded, the yen remained firm against the greenback, after receiving support from Japanese trade data that showed a solid rise in exports and a hefty trade surplus - in line with market expectations. The data showed a 35.5 pct rise in the Japanese trade surplus for May, just off economists' expectations of a 37.8 pct increase.

Meanwhile, a spree of bomb blasts in Iraq and Turkey and a flurry of positive economic data in Japan fuelled a rare rally in the Japanese yen, as it pushed through tough resistance at 108 yen per dollar to touch a 10-week high of 107.02 per dollar.

With investors re-adjusting positions due to socio-economic and geo-political concerns, the yen remains on course for further gains through out next week - likely to be supported mainly by strong economic data.

Japan releases its retail sales, unemployment and industrial production numbers for May during the coming week, but the main focus is likely to fall on the release of the "Tankan" business sentiment survey, which is likely to show an improvement in the overall health of the economy.

Range for the week: 106.40 - 109.40

Sterling

Sterling kicked off the week on a sombre note as lack of major economic indicators kept major players away, with many preferring to wait until next week's Fed policy meeting.

The main event on the UK economic calendar for the week proved to be the release of the Bank of England's MPC meeting minutes, which many analysts believed would support Sterling and reconfirm expectations of higher UK rates.

Meanwhile, tentative data showing Britain's housing market cooling down gave rise to pessimism, while some analysts reckoned that the pound may be vulnerable to a sell-off if the policy makers sounded less hawkish about prospects of higher interest rates.

The release of the BoE MPC showed that policy makers were unanimous on their decision to raise interest rates by 25bps, but there was little to suggest that more rate hikes would follow.

Sterling continued to soften after the minutes, with firm support around the $ 1.8100 level, and analysts saying that the currency is likely to come under further pressure if upcoming data failed to re-ignite speculation of higher UK rates.

Meanwhile, as the world watched a sad English soccer team saying good bye to their dreams of "Euro 2004", Sterling regained some respectability following mixed US economic data and terror attacks in Iraq and Turkey, that kept the dollar under pressure allowing other major currencies to recoup earlier losses.

Market players and investors alike are likely to be treated to a feast of data in the week ahead, as the UK releases data on house prices, consumer confidence and manufacturing for June; and GDP and current account data for the first quarter.

Range for the week: $1.8100 - $1.8400