After an erratic day in the foreign-exchange markets yesterday, overnight trading has been relatively calm. At the New York opening, dollar/yen is holding most of its recent gains, supported by the belief that the outlook for the U.S. economy is still positive and that a soft landing can be achieved. The dramatic rise in the

Dow Jones Industrial Average coupled with a rally in the 30-year bond confirmed this view. For the first time since the

Fed's

action Tuesday, there are signs that the market is now willing to push the dollar higher. Dollar/yen was lately steady in New York at 107.10 after seeing highs of 107.65 in overnight trading.

The euro remains subdued. It's holding at the lower end of its European range at around $0.9710 after seeing a three-week high in Asia. The market has noted yesterday's comments by

European Central Bank

Vice President Christian Noyer that "intervention is a tool in our hands" that the ECB could use at any time. However, there's still doubt that the euro's economic underpinning is strong enough to justify a long-term recovery. New reports from the

Ministry of Finance

and the

IFO

institute in Germany suggest that inflation will ease during the year and that 2.7% economic growth is likely.

In the past 24 hours, euro/yen has moved significantly in favor of the euro and continues to hold these gains at 104.05 compared with yesterday's closing of 104.30.

Tony Norfield, head of global treasury research at

ABN Amro

, sees little benefit to the euro from recent developments that "gave a bit of a boost to the euro but not much upside. Limiting the downside is the large number of short positions, and we need more information to push the currency lower in the short term." Norfield feels that forecasts by European spokesmen of 3% growth for the eurozone will not help the euro against the dollar, as the U.S. is already achieving that kind of performance.

Yesterday's unexpected decision by the

Swiss National Bank

to raise its three-month LIBOR target range by 75 basis points to 2.5% to 3.5% from 1.75% to 2.75% has put Swiss interest rates on par with eurozone rates. This rate hike immediately pushed the dollar down 2.5 centimes from its preannouncement levels. This morning, the dollar/Swiss franc has edged even lower and was lately trading around SF 1.6415.

So far, there is some support for the view that Swiss franc strength may help the euro and other European currencies. Traders still feel that the outlook for the euro is unconvincing, but buying interest in Swissy should create interest in the euro.

Sterling has maintained its recovery against the dollar and was recently trading at $1.5875. Euro/sterling is steady at 61.15. The U.K. global trade deficit for January was 2.7 billion pounds, slightly better than December.

The Australian, New Zealand and Canadian dollars remain in recent ranges with no significant movement overnight. The Aussie is at $0.6070; the NZ dollar is modestly softer around $0.4875. After touching highs against the $C last week, the U.S. dollar continues to trade quietly and is opening in New York at $C1.4660. As noted, traders in Toronto report a solid demand for U.S. dollars, which suggests further weakness ahead.

Recent forex market activity has failed to confirm the trend to a higher dollar, but it is seen as supporting the market's perception that the U.S. unit has bottomed and may now build a base for a rally. So far dollar/yen has not moved above 108 and traders look to next week's release of the

BOJ

quarterly tankan survey of business sentiment to confirm the strength of the Japanese economic recovery.

U.S.

durable goods orders for February were down 2.3%, somewhat weaker than expected. Durable goods orders also declined in January by a revised 2.2%.

The Swiss National Bank has created a lot of buzz in the forex market by its aggressive rate hike, and the Swiss franc has continued to bounce higher against both the dollar and euro. The outlook for the Swiss currency is probably further short-term strength across the board.