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Dollar falls again vs. yen, euro
By MarketWatch
Last Update: 7:33 AM ET March 9, 2005

LONDON (MarketWatch) -- The dollar lost ground again on Wednesday vs. the yen and the euro ahead of key trade data expected later in the week, with concerns over U.S. deficits driving the greenback lower.

"This week there are no other significant data on the calendar before Friday's U.S. trade balance release. The already dollar skeptical sentiment is therefore allowed to continue without opposition and dollar bears are seizing the moment and pushing the dollar down," analysts at KBC Securities said on Wednesday.

The dollar was 0.62 percent weaker at 103.96 yen, and the euro rose 0.19 percent at $1.3364.

The main data event this week is the report on the U.S. balance of trade due out Friday morning. The consensus of economists polled by MarketWatch is for a small downward revision in the U.S. deficit to $56.2 billion from a prior $56.4 billion, although still near a record.

Government data released Wednesday showed Japan's index of leading economic indicators stood at 55.0 in January, the first time in five months the index has come in above the boom-or-bust threshold of 50.0. The result was in line with the consensus forecast of economists polled by the Nihon Keizai Shimbun.

The index is regarded as an indicator for the course of the economy in the coming month. A reading above 50 suggests the economy will expand, while one below 50 indicates a contraction is more likely.

The coincident index, which measures the current state of the economy, came in at 88.9 in January, above the threshold but below the average forecast for a reading of 100.0.

Later Wednesday, investors await the release of the Federal Reserve's "Beige Book" survey of the health of U.S. regional economies for additional clues on the pace and scope of U.S. interest-rate policy.

On Thursday, the Japanese government will release machinery orders data, which are a leading indicator of corporate capital spending.

Yen was steady during the Asian session.

"Yesterday was the euro's day, but today no one wants to take it higher in Asia," said Ryohei Muramatsu, group treasury manager at Commerzbank in Tokyo.

U.S. trading Tuesday

The U.S. dollar fell broadly Tuesday, and some traders said its accelerating losses as the U.S. trading session progressed could be linked to a delayed reaction to a Bank of International Settlements report released Monday.

The report said the share of dollar deposits in Asian banks had dropped to 67 percent in the third quarter of last year from 81 percent in the third quarter of 2003.

The dollar's structural health continues to hinge on the management of the federal budget and trade deficit, both of which have been financed by overseas investment in U.S. markets.

The Fed has raised U.S. interest rates at each of its last six meetings, one factor behind relative dollar stability at the start of 2005. Higher interest rates boost the appeal of dollar-denominated holdings to foreigners.

The Bank of England's Monetary Policy Committee is set to take up interest-rate policy Thursday, and is expected to hold pat at its current 4.75 percent target.

Eurozone rates stand at 2 percent compared to the Fed's 2.5 percent, which leaves the dollar at a slight yield advantage.