The euro is under pressure ahead of tomorrow's quarterly reweighting of the

Morgan Stanley Capital International

indices, a set of cross-border equity indices that are tracked by an estimated $500 billion in global funds.

The reweighting of the indices is a two-part process, the first being a specific reallocation among equities, and not necessarily between countries. The second shift is to reweight stocks that have small floats -- that is, low numbers of shares owned by the public, rather than governments. This second part is what is affecting Europe, because the governments within the European Union take a much larger ownership position in companies than the governments of the U.S. or Britain.

The changes to the MSCI indices "have impacted already," said Jamie Coleman, the managing foreign exchange analyst at

IFR/Thomson Financial

. "I don't know that you'll see any further impact today." Still, he added, "this is clearly a minus for the euro and the yen."

The shift away from European stocks means that all the funds that track these indices, which are some of the most widely followed indices in the world, will have to readjust their holdings, indicating a selloff of those stocks whose allocations were reduced.

The expectations have hurt the European single currency today, which fell this morning to $0.8768, near where it closed trading last week, and down from yesterday's close of $0.8824.

The yen also felt pressure from expectations of an MSCI shift away from Japanese stocks, but was hurt much more today by an announcement from the

Bank of Japan

that it would once again attempt to increase liquidity in the Japanese economy, likely by increasing the money supply by purchasing government bonds. Yesterday marked the seventh consecutive time that the BOJ had offered to buy treasury bills but hadn't found enough sellers.

The dollar climbed in value as a result of the yen's weakness, reaching 123.42 yen per dollar most recently, up from Thursday's close of 122.52 yen per dollar. The downward pressure on both the yen and euro against the dollar is leaving the two little changed against each other. The euro climbed just slightly to 108.14 yen per euro, having closed yesterday at 108.06 yen per euro.

The markets are "really in sort of a range trading" stage, said Coleman, noting that the euro has been mired within the 87 cents to 89 cents range for several weeks, and the yen is floating near 122.50 to 123 yen per dollar. Coleman said that the markets look to be entering the quiet summer period already, and he said he expects the euro to break below its current range and fall under 87 cents next week.

The British pound slipped against the dollar this morning, falling to $1.4300 from $1.4315 at last close. The Australian dollar relaxed to $0.5262, just below an 11-week high and down from $0.5274 at yesterday's close. The U.S. dollar fell against the Canadian currency by a small margin, hitting C$1.5334 this morning, after closing at C$1.5357 last night.