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Sunday, March 30, 2008

U.S. dollar mixed in Sydney morning forex trade

The U.S. dollar was trading mixed against major currencies on Monday although traders said it is likely to remain under pressure until investors see a credible end to the financial and economic problems in the U.S.

While the U.S. economy is seeing continued weakness the euro zone's economic fundamentals remain sound and Japan is showing some strength with inflation on the rise although investors are waiting for the release of the Bank of Japan's Tankan report on Tuesday, traders said.
Key focus for the Tankan report will be investment intentions though overall the report is likely to

provide mixed signals, providing headaches for foreign exchange markets, they said.

'Monday is month-end and financial yearend in Japan, so most players will look to remain on the sidelines,' said John Noonan of Thomson IFR.

'Overall the U.S. dollar should remain under pressure, until the market sees a credible end to the current financial and economic problems in the U.S.'

At 10.20 am (2320 GMT) the dollar was trading at 99.19 yen from 99.22 in late trade in New York on Friday while the euro was at 1.5789 dollars from 1.5795.

ANZ senior currency strategist Tony Morriss said the yen is being supported by risk aversion following a weak performance by U.S. stocks on Friday.

'It is also the end of the Japanese financial year which has supported a bit of an inflow in recent weeks but today I think the yen will be in demand just on risk aversion,' Morriss said.

He said the euro continues to be supported by a better outlook in the euro zone and a still hawkish view on inflation by European Central Bank officials.

Morriss said the Australian dollar is likely to be under pressure because of less appetite for risk as well as softer commodity prices. The market has already factored in the Reserve Bank of Australia leaving interest rates steady after tomorrow's policy meeting.

Activity will pick up during the week due to a number of key US data releases, including the

Institute for Supply Management's manufacturing data on Tuesday, service sector ISM data on Thursday, factory orders on Wednesday and non-farm payroll numbers on Friday.

As well, Federal Reserve chairman Ben Bernanke will testify before a joint house economic committee on Wednesday.

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