March 31 (Bloomberg) -- The yen fell against the dollar as Japanese banks sold mutual funds focused on overseas assets, following the currency's biggest quarterly gain since 1999.
Finance companies are seeking to raise the equivalent of $3.3 billion on the last day of the fiscal year for funds focused on stocks and bonds in Brazil, Russia, India, China and Thailand, data compiled by Bloomberg show. Japan's benchmark interest rate of 0.5 percent has encouraged investors to buy higher-yielding assets overseas, after the yen's 12 percent gain this quarter.
``There's interest to sell yen for the mutual funds being launched,'' said Tokichi Ito, deputy general manager of foreign exchange in Tokyo at Trust & Custody Services Bank Ltd., a unit of Japan's second-largest publicly traded lender. ``These orders can pile up at the end of the fiscal year.''
Currencies This Week
It is set to be another interesting week ahead with developments in the global equity and commodity markets likely to overshadow any important data that is due for release this week. This week's data is expected to continue to weaken, suggesting that the Federal Reserve will have to cut interest rates further and hence posing downside risks for the dollar. On the data calendar this week the main focus will be on the ISM indices, non-farm payrolls and Bernanke's testimony before Joint Economic Committee on Wed.
The Aussie dollar will continue to remain vulnerable to commodity price fluctuations, but any downside pressure is likely to be limited against the struggling greenback. The RBA meets on Tuesday and is widely expected to keep rates unchanged at 7.25%. The RBA Governor will also testify to Parliament on Friday. On the data calendar this week; Mar TD-MI inflation gauge, Feb private sector credit and Feb retail sales.
The New Zealand dollar should remain within current ranges, supported by the fact that the current high levels of interest rates are unlikely to be cut in the near term after Reserve Bank Governor Alan Bollard signalled last week that there was no relaxation on the horizon. On the data calendar this week; Feb building consents, Mar NBNZ business confidence, Q1 Employment Confidence Index, and Mar ANZ commodity prices.
Sterling looks set to remain under pressure, particularly versus the euro as markets price in the increasing likelihood of further UK interest rate cuts. On the data calendar this week markets will be looking to the manufacturing and services CIPS surveys for any further evidence of a cooling in the pace of activity. The BoE's King is scheduled to speak on Monday and comments will be closely watched following last week's admission of a bias towards lower rates.
It promises to be an interesting week for the Euro after last week's strong rally, with the possibility of the Euro breaking through its all time high of 1.5902 against the USD. On the data calendar this week the main focus will be on the March CPI estimate. Manufacturing and Services PMI, unemployment rate and retail sales are also due.
It's an important week in terms of Japanese data however events on financial markets are likely to dominate direction. The Bank of Japan's Tankan survey for Q1 features this week and is forecast to show a deterioration in sentiment over the quarter due to weaker global growth and credit market concerns. Also on the data calendar; large manufacturer survey and Q1 capital expenditure is due. The data will help determine whether BoJ will need to cut rates to stimulate growth in Q2.
The Canadian dollar could receive an injection of strength from some favorable data releases this week. On the data calendar this week a number of important growth data are due; Jan GDP, Employment report and Ivey PMI.
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