The forex market has remained quiet during the New York morning with a continuation of the tone of a weak euro and a firmer yen broadly in place. After opening at 104.05, the yen is now slightly weaker at 104.55. The euro is lower at 94.70 compared with 95.00 at the opening. The key euro/yen cross is holding at lower levels around 98.90. The dollar is benefiting from a modestly positive tone in the U.S. stock markets.

The market took in stride yet another assurance from Japanese Finance Minister Kiichi Miyazawa that the

Bank of Japan

would intervene in the forex market if moves became too volatile.

The goal of both European and Japanese authorities would be to see the euro/yen cross move higher and to stay well above the 100 yen per euro parity. Clearly this has not been achieved by the


meetings and many analysts see no positive options for the beleaguered euro. In keeping with this view,

Goldman Sachs

has lowered its 3-month forecast for the euro to $0.95 from its prior estimate of $1.08. Traders are of the view that this still represents an optimistic assessment.

Euro zone inflation in March showed a rise of 2.1% year-on-year compared with 2.0% in February. These data were above the

European Central Bank's

upper limit and provide a potential justification for a euro rate increase at the next ECB meeting on May 11.

"U.S. stock s are not out of the woods just yet and FX markets could remain very volatile. However if markets stabilize over the coming days the euro could be subject to renewed pressure towards lifetime lows," says Geraldine Concagh of

Allied Irish Bank


At midday, the U.S.dollar/Canada has held close to its best levels around $C 1.4840. Recent U.S. data have put pressure on the Canadian dollar as the threat of a bigger adverse interest rate differential is now clear.

The dollar/Swiss franc has recouped losses made at the end of last week and is now trading at the upper end of recent trading ranges at SF 1.6595.

Sterling is losing ground in line with a growing market sentiment and has eased to $1.5760 from its opening at $1.5825. Clearly this morning's benign inflation data have left the

Bank of England

with little justification for further rate increases.

As noted earlier, John Vickers, chief economist at the

Bank of England

, sees a decline in sterling vs. the euro based on interest differentials and the current overvaluation of the pound. Similar sentiments are made by other U.K. analysts. " The weakening of sterling is coming to fruition despite the fact that most people scoffed at it," says David White of

NatWest Global Markets

. " I think we will see $1.45 by the end of the half year."

The Australian dollar is following its recent path of losing ground in Asian markets and then stabilizing in New York. After seeing overnight lows of $0.5890 the $A opened in New York at $0.5945 and is holding at that level at midday.

As expected the G7 meetings have done nothing to affect the currency markets and traders have reverted to the well-established pattern of buying the yen and selling the euro. Sentiment is more negative than ever towards the European unit.