The dollar has stabilized after yesterday's slide. The greenback's fortunes against the yen were bolstered by comments from the Ministry of Finance's Kuroda, who called the yen's recent rise excessive. While the dollar's gains are concentrated against the yen, it's posting modest upticks against the complex of European currencies. What appears as largely a technical-inspired bounce in the euro to the $1.10 area is presenting interbank dealers and other short-term operators with an attractive selling opportunity.

Japanese equities extended their recent rally, with the Nikkei posting a 1.25% rise.

Reports and anecdotal evidence continue to suggest that foreigners are the featured buyers of Japanese stocks. Some Japanese institutions may also be engaged in window-dressing and repatriation for the fiscal year-end. However, some press reports suggest that Japanese financial institutions may be reducing their cross-shareholdings. Rather than sell in the Japanese market, the reports suggest, these institutions engaged in paring their equity portfolios are selling discretely in offshore markets, especially London.

Japanese government bonds were supported by comments from the finance minister intimating that the MOF has been instructed to be "flexible" in buying JGBs. Another report suggested that the MOF will continue to support the market at the start of the new fiscal year. The

Bank of Japan

conducted a rinban operation (coupon pass) earlier today. Through the rinban operations, the BOJ has bought about 200 billion yen worth of bonds every month since last August. Many look for the size of the rinban operations to increase, but thus far the BOJ remains reluctant. The MOF is slated to sell 1.4 trillion yen of 10-year bonds next week, which represents a small scaling back of the intended offer. The yield on the benchmark bond slipped 7 basis points to 1.71%. The risk is that Japanese bond yields will back up a bit ahead of next week's auction.

The dollar bounced smartly after falling to its lowest level in a month against the yen.

Today marks the first day in nine sessions that the dollar has risen above the previous day's high. The dollar bulls want to see a close now above yesterday's high, which comes in near the 118.50-yen level. Additional resistance is pegged near 119.60 yen. The euro has tested support near the $1.08 level at least five times this month and although it has frayed a bit, that support has largely held. If this is going to be more than just a consolidative phase for the euro in its trough, it needs to rise through the $1.1050 level.

Generally speaking, European officials have regarded the dollar's rise against the euro this year as based on economic fundamentals, specifically the growth differentials. The vice president of the


took a different tack. Stark argued that given the large U.S. current-account deficit, the dollar's strength is not justified. Many dollar bears share that sentiment. Yet the foreign exchange market is much more complicated. The U.S. has had a current-account deficit for the better part of the past two decades, during which time the dollar has appreciated and depreciated. Simply put, changes in the U.S. current-account deficit offer little help in explaining or forecasting the dollar's fluctuations.

Ideas that the resignation of the EU Commission will speed up reforms are sadly mistaken.

While there ought to be personal responsibility for the corrupt and inept management, the real issue is not about personalities but about institutions and structures. To call the EU Commission dead weight, as some observers claim, is grossly unfair. The EC Commission was engaged in significant reforms. The main obstacles to those reforms are the individual countries. This is evident in the debates over reforming agriculture spending, where the EU Commmission was seeking much bolder reform that the individual countries appeared willing to accept. Reports suggest that NATO's Solana and Italy's former Prime Minister


are the top contenders to head up a new EU Commission.

The combination of a softer-than-expected jobs report and the minutes from the

Bank of England's

recent policymaking meeting has encouraged ideas that another rate cut may be delivered soon. Unemployment in the UK rose in February, marking the first increase since last November. Arguably even more important from the BOE's point of view was news that wage pressures are easing. Average earnings increased by 4.3% in the November-January period from a year ago. This compares with a 4.5% rise for the previous three-month period and 5.7% at the peak set last spring. Minutes from the recent Monetary Policy Committee meeting noted that the rise in sterling could lead to additional rate cuts and that the outlook for inflation is lower than previously. The MPC meets again on April 7-8.

European bonds are largely steady with yields near their lowest level in three weeks.


European Central Bank

meets tomorrow and there is little chance that rates will be cut. A


survey of 28 market participants found no one is forecasting a cut tomorrow. However, a little more than half expect a cut next month. After tomorrow the ECB meets again on April 8.

European equities are under some pressure today. Profit-taking has been reported among financial, telecommunications and auto issues. Weak earnings are weighing on oil stocks.

Trade tensions between the U.S. and Europe and Japan receive the bulk of our attention.

However, trade tensions with the U.S.' largest trading partner, Canada, are not generally recognized. Earlier this week, Canada's

House of Commons

approved legislation that bans Canadians from advertizing in foreign-owned magazines sold in Canada. It is not clear at this juncture whether it can pass the Senate. However, the U.S. has threatened to place sanctions on $4 billion worth of Canadian exports to the U.S.

The U.S. dollar has attempted in vain to overcome resistance near C$1.5300 twice this month. Provided this area remains intact, the U.S. dollar could slip back toward the C$1.5100 level. The U.S.' other NAFTA partner, Mexico, continues to shine. Yesterday's auction produced the lowest rates on 28-day cetes (T-bills) in seven months. The rate fell 222 basis points to 22.17%. This was a larger fall than had been expected by market participants. The recovery in oil prices and lower-than-expected February inflation has helped bolster sentiment.

The strength of the Mexican peso is prompting some concern from government officials, who fear that the sizable inflation differentials may lead to an overvalued peso. If anything, this should encourage expectations for continued declines in interest rates. Look for the yield on the 28-day cetes to fall below 20% this spring.

Marc Chandler is an independent global markets strategist who writes daily for At the time of publication, he held no positions in the currencies or instruments discussed in this column, though positions may change at any time. While he cannot provide investment advice or recommendations, he invites you to comment on his column at