US dollar consolidates its gains (page 2 of 2)

With market focus falling on developments in Europe, the yen remained on the sidelines with exporter sales of dollars above the 108 level and speculation on a possible revaluation in the Chinese yuan keeping a check on a further slide in the Japanese currency.

A report in the Financial Times about the United States having urged China to re-value its currency by 10 pct was taken with a pinch of salt, as the news was largely ignored by market players who showed no reaction in the absence of any confirmation from officials.

A Chinese official later stated that they had received such a request, but said, "the time was not right" for such a move, and cautioned the United States against pushing too hard for currency reforms.

The release of a mixed batch of economic numbers and the minutes of the last US FOMC meeting helped the yen keep its' head above the surface, although a weekend spike in the dollar pushed it back closer to one-month lows around 108.00.

Japan releases its industrial production and unemployment data for April next week, but it is likely to be over shadowed by key data from the United States that may give fresh clues on the direction of interest rates in the US. In addition, developments on the Chinese yuan revaluation story may also have a limited impact on the Japanese currency's fortunes in the week ahead.

Range for this week: Y105.90-Y108.90

Sterling

The Great British Pound had a rough start to the week after a survey showed that house prices in England and Wales were on the decline, adding to the speculation of a peak in British rates and putting an end to any hopes of a further hike.

As soccer fans of Liverpool prepared to make the journey to Turkey for the European Cup Final against AC Milan, Sterling's fortunes rested on the performance of the domestic economy and the outcome of the French vote.

Analysts said that a "no" vote in France could support Sterling, whilst an "yes" could add pressure on UK's currency. The currency received another shock after data showed that the British economy grew at its' weakest pace in nearly two years in the first quarter, due to a slump in manufacturing.

A survey that showed a marginal improvement in British factory order books and manufacturers the most pessimistic for five months on output added to the rot as the currency was pushed below $1.8200 for the first time in seven months in the face of a broad based dollar rally.

In the week ahead, the outcome of the French vote, and the release of UK consumer confidence and manufacturing data is likely to be watched closely for clues on the direction of British interest rates and Sterling.

Range for this week: $1.8200-$1.8500