The yen was continuing to lose ground with the forex market paying a lot of attention to yesterday's collapse of the Daihyaku Mutual Life Insurance, which is seen as creating more doubt about the viability of the Japanese financial sector.

More generally, this issue is viewed as putting pressure on the Japanese authorities to keep economic conditions easy and to defer any thought of ending the "zero-interest-rate" policy.

Comments by

Bank of Japan

policy board member

Kazuo Ueda

indicating that the board has been discussing the possible ending of this policy were ignored by the market. Similarly, a strong performance by the

Nikkei 225

-- which closed 2.2% higher -- was not supportive of the yen.

Dollar/yen opened firmer at 108.90, about one yen above yesterday's closing at 107.70. The euro/yen cross has again moved in favor of the euro and was recently at 101.50.

"It's been a bad morning for the yen," said Mark Henry of

GNI Financial

in London. "What we are seeing is caution over the Japanese economy. The warning was the rumors of the

Economic Planning Agency

fudging the figures."

Henry sees this month's


data for Japan as potentially very significant in determining the yen's future trend. He said that the number, "could be a bad figure with negative revisions." It may suggest that, "Japan is not as far down the road to recovery as believed."

The euro eased back marginally in overnight trading and opened at $0.9325 after closing at $0.9370 yesterday.

The euro zone

Purchasing Managers' Index

was at 59.7% in May from 60.7% in April. Analysts regard this result as positive and probably indicative of a further interest-rate rise in the coming months.

Sterling was slightly easier at $1.4950. The euro/sterling cross had barely moved and was unchanged at 0.6230.


U.K. Purchasing Managers' Index

for May was 50.7%, little changed from April.

Dollar/Swiss franc continued to move choppily and opened higher at 1.6880. The euro/Swiss franc cross remained flat at 1.5730.

The U.S. dollar was recently quoted at C$1.4930, 35 basis points below Wednesday's close.

The Canadian dollar has continued to benefit from yesterday's impressive


data. Canada's GDP rose 4.9% in the first quarter and its trade accounts showed a C$4.5 billion surplus.

The Australian dollar continued to lose ground and opened around $0.5710. In line with recent experience, Australia's

retail trade

data for April were unchanged from March, below expectations of a 0.6% rise. There is little likelihood of an imminent interest-rate hike to boost the A$.

The New Zealand dollar has ticked lower at $0.4575.

Although the South African rand continues to have a good week, the currency has drifted back above the 7 rand/dollar level. It opened in New York at 7.02.