Currencies
The yen fell to its lowest level since July 11 after Japan's government said that the economy shrank for the second straight quarter. Abetting the drop were currency speculators, who piled on bets that the dollar will climb against the yen and bought up futures contracts. Last week's U.S. data showed a larger than expected rise in U.S. consumer sentiment, a decline in jobless claims for the week, and unexpected improvement in the service sector all fuelling optimism the U.S. economy had seen the worst of its recession. By contrast, release of the closely watched Tankan survey of confidence among large Japanese manufacturers this week is expected to show a decline to the lowest level since March 1999. That means businesses in Japan have a grimmer outlook for profits and will likely pare expansion plans, further hurting growth.

Japanese exporters buying yen to bring overseas profits home and growing wariness about putting money abroad at a time of global economic slowdown have kept demand consistent for yen even though the economy has foundered. Meantime, a 21.7 percent decline in Japan's Nikkei 225 stock index this year has pinched banks and companies, which may sell some foreign investments and bring their money home to cover losses.

With currency traders focused on the yen, the euro stayed within a narrow trading range last week. Economic survey data did not surprise - sentiment remained negative. With the last ECB policy meeting of 2001 history, traders are focusing on the critical introduction of euro coin and currency on January 1, 2002.

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