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With a number of significant economic news items due today and tomorrow, markets are rather skittish and choppy. Overnight, the dollar lost ground to European currencies, but it has made progress elsewhere.

Once again, the main focus of attention is the likely direction of interest rates in major centers. This morning, the

Bank of England

left U.K. interest rates unchanged at 6%. The

European Central Bank

also announced following its policy meeting today that it left interest rates unchanged at 4.25%.

Similar issues are on the table in Japan. In the U.S., tomorrow's

employment report will be scrutinized for indications on the future track of


interest-rate policy.

After a solid up move yesterday, dollar/yen is opening firmer at 107.35. The primary issue in Japan is the apparent conflict between the stated wish to raise interest rates from their current levels and the erratic performance of the Japanese economy. With the yen now looking a little weaker, the

Bank of Japan

has some greater freedom to push interest rates higher without necessarily causing exchange rate problems.

With a weak yen, the euro continues to edge higher on the euro/yen cross rate and is now opening at 102.50.

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The euro is higher against the dollar as traders continue to give weight to a more encouraging outlook for the euro zone. The single currency is opening at $0.9550.

New data did not help to clarify the economic situation in Europe. Euro zone producer prices rose 0.8% in May, well above forecasts. German unemployment for June rose by 2000 from May, below expectations. Industrial orders in Germany showed a strong gain of 1.9% in May.

" It's Catch 22. Do they wait until September and hope that things don't get out of hand or do they react to the inflationary pressures that have been picking up considerably," Moran asked.

Bank of France

governor, Jean-Claude Trichet, described the euro's chronic weakness as an "overshoot."

"The euro is in a phase that mirrors the U.S. dollar in the mid-1990s when it was undervalued against European currencies," he said.

The pound is also opening firmer at $1.5120. The euro continued to move higher versus the pound and is opening at 63.10 pence.

The decision to leave U. K. interest rates unchanged was widely expected and is not seen as weakening the pound in the short term. "In terms of the BOE, it was pretty well expected that we wouldn't see anything," Moran said.

Dollar/Swiss franc is a little weaker at 1.6220. The euro is steady versus the Swiss franc, at SF1.5480.

The U.S. dollar pushed up versus Canada yesterday. This mini rally was largely maintained overnight to see today's opening at C$1.4870.

The Australian dollar is firmer at $0.5905, and its New Zealand counterpart is fractionally higher at $0.4610. These currencies are seen as suspect at the moment, with many Asian economies suffering in line with the slow recovery in Japan.

The South African rand is steady at 6.80.

The post-election uncertainty in Mexico seems to have receded, and the peso is fairly steady around 9.51.

The Polish zloty is little changed at 4.31 per dollar. There is some doubt over the feasibility of Poland's 2001 budget proposals, which were announced yesterday.

The Indonesian rupiah has opened at 9290 per dollar after falling sharply yesterday. The currency is expected to be volatile and to cause some uncertainty for other Asian currencies.