Today's overnight stories are from the Far East with important developments in Japan and Australia.

In Japan the

Nikkei

moved over 20,000 with investors optimistic that economic data going forward will be more indicative of better economic growth to come. (For more, see today's

Asian Markets Update.) Supporting the Japanese equity market gain was international investors' desire to repatriate funds from some overseas markets which have shown weakness in recent weeks. Specifically, funds have been brought back from the U.K., Australia and Canada, and from euro investments.

Buoyed by these trends, the yen recovered from the 110 per dollar level at yesterday's New York close and firmed to 108.9 per dollar in Tokyo. In euro terms the yen was able to maintain its recent gains and saw a new high at 105.5 yen per euro. The yen also benefited from weakness in the sterling/yen cross following recent comments from

Bank of England

Gov.

Eddie George

that the pound was overvalued. The sterling/yen cross declined to 172.5 from 174.1 in yesterday's U.S. trading.

The Australian dollar sold off sharply in Sydney as retail trade data showed a 0.4% decline in January as compared with an expected 1.8% gain. Compounding the problem was a downward revision in December sales to -0.8% from -0.4%. The immediate impact of these weak data was a significant selloff in the Aussie dollar, sending it below $0.61 for the first time since 1998. Market participants believe these numbers will cause the

Reserve Bank

to delay indefinitely any interest-rate increases it might have considered. This view clearly suggests that the differential with the U.S. will tend to make the Aussie dollar less attractive to the currency markets.

In European trading, the euro firmed modestly against the dollar to $0.9691 from $0.9646 at the New York close. Data indicating that eurozone manufacturing had picked up in February helped the regional currency. This small vote of confidence was prompted by some views that the

European Central Bank

may raise zone interest rates at its meeting on Thursday. This opinion is a minority one and the euro is unlikely to get much of a boost in the current skeptical climate. Further gains in the U.S. stock markets also cast doubt on the euro's appeal.

In London, the pound was essentially unchanged in dollar terms with both currencies hurt by the overnight rally in the yen. Sterling lately stood at $1.5786 after closing in New York at $1.5784. The CBI survey of retail sales for February showed solid sales growth coupled with broadly based price reductions. This suggests that inflation targets can be met with the strong pound contributing to keeping inflation under control. These factors should continue to keep the Bank of England from aggressively pushing up interest rats and sterling can be expected to reflect a softer tone in the currency markets as a result.

In today's U.S. market trading the tone of the

Dow

and the

Nasdaq

will be important in influencing forex traders' views. Assuming this factor is supportive, the dollar should hold current levels and possibly make modest gains across the board.