Currencies
There are signs that the Japanese government is trying to push the Bank of Japan in the direction of further monetary easing. The government formally requested the Bank, when intervening in the foreign exchange markets, keep its intervention unsterilized - that is leaving the yen it sells to buy other currencies as extra liquidity in the financial system. All this was interpreted by some foreign exchange traders as signaling that more intervention to push down the value of the yen may be imminent. On several occasions in the recent past, Japan has sought to lower the yen's level because of worries that its rise would hurt exports.

The yen was weighed down by the government's confirmation of a ¥3.000 billion surplus budget designed to spark economic growth, a move greeted with skepticism by the markets. But analysts warned further dollar gains could be limited in the short term by Japanese exporters' hedging activities. Japanese exporters believe that speculation over military conflict in Iraq will limit the scope for the dollar to appreciate should U.S. economic data prove more favorable.

After remaining above parity since November 5th, the euro slipped below that level on Friday due to poor GDP data from both France and Germany. Because of the EU Growth and Stability Pact, France and Germany are by agreement forced to cut pump-priming spending (against the spirit of John Maynard Keynes). The Pact says that government deficits must be below 3 percent of GDP. Germany has already breached that level, while France has shifted its priorities to growth, risking a violation of the 3 percent limit.

Last Week's Highlights   •   Global Stock Market Indexes   •   Recap of Global Markets   •   Currencies   •  Indicator Scoreboard

The Bottom Line   •   Looking Ahead