Market Rumours

2010/06/28 19:15DJ BIS: Can't Delay Fiscal Tightening Until Economy Recovers
BASEL, Switzerland -Highly indebted nations can't afford to wait for economic growth to strengthen before tightening fiscal conditions, the general manager of the Bank for International Settlements said Monday. Speaking at the Annual General Meeting of the bank for central banks, Jaime Caruana stressed that delaying government spending cuts and tax hikes would risk renewed market strains, and applauded the European governments that are launching aggressive policies to cut budget deficits. Caruana's comments come after officials from the wealthiest of the Group of 20 nations meeting in Canada over the weekend agreed to halve their government deficits by 2013 and stabilize their debt loads by 2016. 'When markets and the public start to lose confidence, it is an illusion to suppose that delaying the adoption of the policies we know are needed would smooth the adjustment process. We cannot wait for the resumption of strong growth to begin the process of policy correction,' Caruana said. 'In particular, delaying fiscal policy adjustment would only risk renewed financial volatility, market disruptions and funding stress. A much better strategy is to set out credible front-loaded actions for meaningful fiscal adjustment and for restructuring the financial system.' Caruana also underscored the need for central banks to maintain a medium-term focus in setting monetary policy. While core inflation is benign at present in the major advanced economies, and there is little reason to anticipate a sharp rise in the near-term, policymakers need to 'remain vigilant' about the longer-term risks, he said. 'In current circumstances, when public sector debt is rising so rapidly, any expectation that central banks would be prepared to tolerate higher inflation could easily unsettle the markets,' he warned.

2010/06/28 18:57=DJ BIS: Daunting Task Ahead To Support Economy, Avoid New Risks
BASEL, Switzerland -Global policymakers face a 'daunting' task to balance their support for still-fragile economies and markets, while avoiding unwanted side effects from long-standing stimulus policies, the Bank for International Settlements said Monday. In its annual report, the bank for central banks highlighted the risks posed by high public debt levels, concerns about which are already jeopardizing recovery in the euro zone, and in the longer term could curb potential growth, and make it harder to keep inflation low and stable. Central banks will have to take the impact of much-needed fiscal tightening into consideration when judging their appropriate policy stance, but they must also be aware of the dangerous distortions that can occur from keeping interest rates extremely low for an extended period, it warned. 'To put it bluntly, the combination of remaining vulnerabilities in the financial system and the side effects of such a long period of intensive care threaten to send the patient into relapse,' the BIS said. European Union finance ministers and the International Monetary Fund agreed last month to commit EUR750 billion to support euro-zone governments that have difficulty borrowing in the international bond markets, after investor fears about Greece's creditworthiness spread to other countries. The European Central Bank began to buy euro-zone government bonds in an effort to bring down borrowing costs, while the U.S. Federal Reserve also simultaneously reopened dollar swap lines with several major central banks. The BIS said that events in Greece underscored the risk that highly indebted governments now have hardly any financial room for maneuver, and may not be able to act as buyers of last resort to save their banks in a crisis. Unless countries take resolute action to address their fiscal problems, there's a 'key risk' that investor concerns will worsen and engulf other countries, it warned. 'The sovereign debt crisis in Greece is clearly jeopardizing Europe's nascent recovery from the deep recession brought on by the earlier crisis,' it said.

2010/06/28 17:35=DJ Three-Month Euribor Rises Again; ECB Facility Expiry Eyed
LONDON -The cost of borrowing euros in the interbank market rose to a new eight month high Monday, as banks prepared for the expiry of an EUR442 billion liquidity facility from the European Central Bank at the end of the month. The three-month Euro Interbank Offered Rate, or Euribor, the rate at which interbank term deposits in the monetary union are offered, rose to 0.754% Monday from 0.748% Friday, the highest level since Oct. 1, 2009. Euribor is tracked more widely than its London Interbank Offered Rate euro counterpart, and is used to benchmark a wider range of assets. Allied Irish Banks contributed a rate of 0.82%, and Dexia offered a rate of 0.79%. Confederacion Espanola de Cajas de Ahorros contributed a rate of 0.80%, while UBS offered the lowest rate of 0.64%.

2010/06/28 16:37=DJ Forex Focus: Aussie's Rally Coming To An End
LONDON -It's like watching a bird having its wings clipped. Up until last week, the strength of the Australian economy, the country's close association with China as well as the prospects for the global economic recovery all appeared to be working in the Australian dollar's favor. Within a few days, however, the currency's future has become much less certain. See how the Aussie's rally has stalled: http://www.dowjoneswebservices.com/chart/view/4184 Australia has lost its prime minister, China has unpegged its currency and confidence in the U.S. economy isn't what it was. In other words, there is a lot less reason for investors to buy the Aussie now than there was even a week ago. In itself, the resignation of Kevin Rudd as prime minister may not have been a bad thing. He was forced to resign largely because of his plans to introduce a super tax on the profits of mining companies. However, the planned policy didn't go with Rudd. His deputy who stepped into his shoes, Julia Gillard, is as committed as Rudd to achieving a budget surplus and this means the tax could well stay, still posing a risk to the country's growth prospects. On top of that, Australia now faces a general election that could be called before the end of the summer Domestic issues aside, China's surprise decision the weekend before last to finally abandon its yuan peg to the U.S. dollar was not good news for the Aussie. The Australian dollar has long benefited from its close trading links with one of the world's largest and strongest economies. Although Beijing has so far kept a lid on an serious rally in the Chinese currency--the yuan being fixed early Monday hardly changed from its fix on Friday--this still represents a de facto tightening in Chinese monetary policy that will slow the country's economic expansion as well as its demand for Australian commodities. As a currency strategist at Morgan Stanley said: 'Though it has been difficult, we remain short of the Australian dollar.' 'As China has begun to allow the yuan to revalue, we believe that the Australian dollar will lose support as it has long acted as a proxy trade for China.' To make matters worse for the Aussie, there was distinct reduction in investor appetite for risk last week as the U.S. Federal Reserve made it clear that the U.S. recovery remains fragile and that U.S. interest rates are unlikely to go up early next year as most financial markets have been expecting. On Friday, the official U.S. first quarter gross domestic product estimate was revised down to 2.7% form 3.0%. Concern over Europe's sovereign debt crisis also reared its head again as the cost of insuring against a default in Greek debt rose to a new record high. Apart from raising the price that other peripheral euro-zone debtors have to pay for their funds, this also puts the health of European lending banks back under scrutiny. This means that international investors will once again become nervous, preferring to put their funds in safe havens rather than take the risk with higher-yielding currencies such as the Aussie. Early Monday in Europe, the Aussie was flat. It traded at $0.8740 at 0645 GMT, unchanged from late Friday in New York, according to EBS. Overall, market sentiment remained negative with investors worried about the impact the agreement by the Group of 20 industrial and developing nations on halving deficits by 2013 will have on growth prospects. The euro slipped to $1.2364 from $1.2388 but was hardly changed at Y110.52, compared with Y110.56. The dollar did manage to rise to Y89.40 from Y89.26.

2010/06/28 16:35DJ Longer-Term JGBs Fall On Profit-Taking; Eyes On Data, July Election
TOKYO -Longer-term Japanese government bonds were lower Monday as investors became eager to sell cash bonds to lock in profits following a sharp upturn in the safe-haven assets last week. The benchmark 10-year yield was up one basis point at 1.150% as of 0600 GMT. The 20-year yield also rose one basis point to 1.885% and the 30-year yield climbed 1.5 basis points to 1.950%, making the yield steeper. Bond yields move inversely to prices. Last Thursday, the key 10-year yield fell briefly to a seven-year low of 1.125%. Some traders say longer-term bond prices could keep falling for the time being as it remains uncertain whether the ruling Democratic Party of Japan can win enough seats in the July 11 upper house election to maintain its current coalition framework and pave the way for fiscal rehabilitation. Longer-term JGBs have gained favor amid growing hopes that Prime Minister Naoto Kan will raise the nation's 5% consumption tax rate to 10% to rebuild fiscal health, but an electoral setback for the DPJ would likely prompt players to sell cash bonds. 'Many investors now fear that longer-term JGB yields may rise back sharply if the DPJ loses (seats) in the coming election,' one trader at a Tokyo securities house said. 'If speculation increases that the DPJ will face difficulties in achieving fiscal reform, demand for JGBs could peter out, pushing the yields higher.' However, some analysts said the JGB market will likely remain stable given that the outlook for the economy has become gloomier as risks grow that the euro-zone's sovereign debt problems will continue driving the yen higher, weighing on Tokyo shares. This week, the Bank of Japan's quarterly tankan survey and U.S. June jobs data are due to be released Thursday and Friday. If the results indicate that recovery in the U.S. and Japan's economies will lose momentum, longer-term JGB yields may slide again with U.S. Treasury yields dropping. The tankan may show Japan's business investment has been picking up, but 'other data could suggest the possibility that the pace of economic recovery in Japan and the U.S. will slow,' said Naomi Hasegawa, a strategist at Mitsubishi UFJ Morgan Stanley Securities. 'That could prevent JGB yields from rising further.

2010/06/28 16:34DJ ECB: Euro-Zone May M3 -0.2% On Year; Forecast +0.4%
FRANKFURT -The annual rate of decline in the euro zone's broad money supply slowed in May, the European Central Bank said Monday, surprising forecasters, who had expected an increase. The ECB said M3 money supply fell by 0.2% from a year earlier, a notch lower than the previous month. Forecasters polled by Dow Jones Newswires had predicted an average rise of 0.4% in May. The moving three-month average growth rate of M3 was also down 0.2% on the year. ECB website: www.ecb.int

2010/06/28 15:33=DJ BIG PICTURE: US GDP Revisions Raise Worries About Consumers
NEW YORK -The downward revision to first-quarter U.S. economic growth leads to a pivotal question about the recovery: What's the matter with consumers?The quick answer is a lack of jobs.The revisions to real gross domestic product released Friday showed the U.S. economy grew at an annual rate of 2.7% in the first quarter, down from the 3% reported a month ago and the 3.2% rate reported in April.Leading the slowdown was the consumer sector. Growth there was ratcheted down to 3% from 3.5% estimated in May.The numbers point to the challenge of this recovery: Consumer spending--which accounts for about 70% of U.S. GDP--is rising, but not at the strong pace that triggers the virtuous cycle of rising demand needed to fuel more production that leads to better hiring.'The downward revision to this component suggests that consumer spending had a bit less momentum going into the current quarter than we previously thought,' said Zach Pandl, economist at Nomura Securities.So, what is the matter with consumers? Weak hiring is holding back income growth needed for spending since credit and wealth aren't ready resources for most households. Although output and productivity are both rising, the resulting gain in revenue is accruing more to profits, rather than being paid out to workers.That gap shows up in the revisions to national income.In theory, national production and income should be equal but, because of different data sources and measurement errors, they can move in different directions quarter to quarter.First-quarter nominal national income was revised up by $42 billion. Almost all of that--$35.5 billion--showed up in profits. Employee compensation was revised up by only $1.1 billion.Companies are trying to repair balance sheets hit by the recession, but the flipside of cash building is consumers can't lead the recovery. Meanwhile, other sectors are reluctant or unable to be big growth engines.Companies aren't using much of their money for investment. First-quarter business investment was revised down to a 2.2% gain from 3.1% earlier. The government sector remains a drag because of the budget woes at the state- and local-government level. Sovereign-debt woes in Europe and a stronger dollar suggest foreign trade won't add as much as economists had hoped earlier this year.The lack of demand is raising worries about the recovery's health, but the solution is clear.'A gain in private-payroll growth closer to the three-month trend of 139,000 would go a long way to quieting some of the double-dip [recession] talk that has been growing in the marketplace,' said Michelle Girard, an economist at RBS.June payroll data will be released next Friday, and Girard forecasts Census firings will cause the top-line number to fall by 90,000 jobs. Private payrolls, however, will increase by 160,000, a level that, if sustained, should be healthy enough to support the recovery.For their part, consumers haven't thrown in the towel. The Reuters/University of Michigan consumer-sentiment index rose to 76 in late June, up from 73.6 in late May and the highest reading since January 2008.Indeed, resilience has always been the hallmark of the U.S. consumer. But consumers can't spend resilience. In the era of credit constraints and volatile wealth, shoppers need growing paychecks to do their part for the recovery.

2010/06/28 15:04DJ Forex Options: Dollar/Yen Options Up As Spot Near 5-Week Low
TOKYO -Dollar/yen currency options edged up in Tokyo Monday as the underlying exchange rate traded near a five-week low, increasing demand for hedges against further slides. The dollar traded as low as Y89.24 early Monday in Asia, near Friday's trough at Y89.21, the lowest since May 21. That pushed benchmark one-month at-the-money dollar-yen volatilities to 11.45%/12.15% as of 0200 GMT, from 11.20%/11.90% Friday in New York. But dealers said any further rises in option prices may be limited this week, unless the dollar falls below Y89.00, which could trigger stop-loss selling orders that would push it lower. Such an outcome may be unlikely, though, as 'there are still no compelling reasons to actively buy the yen' given expectations for Japanese interest rates to stay at rock bottom levels for the foreseeable future, said a foreign exchange dealer in Tokyo. The dollar likely won't fall below Y89.00 this week, although economic data could weigh on the unit by raising more questions about the health of the U.S. recovery, the dealer said.

2010/06/28 14:43=DJ Top Investors, Bankers Expect Euro To Weaken -RBC Survey
TORONTO -The euro's downward spiral is expected to continue over the next 12 months, more than two-thirds of the world's senior bankers, hedge funds and private-equity managers said in a RBC Capital Markets survey. The survey, released Monday, said 80% of the 440 respondents believe the U.S. dollar will remain the dominant reserve currency for the next three years, although that drops to 57% over five years. But, it's not so much because of confidence in the greenback as it is due to the lack of a real alternative. Just 15% see the Chinese yuan as the reserve currency of choice within five years and even fewer, 12%, saw the dollar being replaced by the euro. Rising sovereign debt in developed economies remains an underlying concern despite recent European austerity measures. That helps to explain much of the markets' volatility, said Marc Harris, RBC Capital Markets' co-head of global research. The survey 'gives you the breadcrumbs of all the key players' in the financial community and helps explain why the capital markets 'devolve into moments of fear in ways that seem very different from past crises.' Almost half of those surveyed said there is a greater than 50% chance of one or more countries leaving the euro zone and more than a third see at least a 25% chance of a complete break-up of the euro zone in the next three years. Greece is considered the most likely to leave the euro zone, followed by Portugal, Spain and Ireland, all of which are mired in debt. Germany is perceived as the fifth-most likely to decamp from the euro zone, possibly reflecting the respondents' concern that the German government may lose confidence in the monetary union if the current crisis continues. The Group of 20 country most likely to default on debt is Italy, followed by Argentina, Turkey, Mexico and Russia, the respondents said. The U.K. is perceived to be the western European country, after Italy, most likely to default on its debt, both within the Group of Eight and the G-20. According to the survey, 59% think developed countries won't have the fiscal firepower to 'jumpstart' their economies if there's another financial crisis. And, they see an increased divergence between emerging and developed economies, with most optimistic about Asia and negative on Europe. Asked what they fear more, inflation or deflation, the majority of those polled expect inflation to pose a greater threat than deflation to their financing and budgeting decisions. That's up from an evenly split response in a previous RBC survey conducted in the third quarter of 2009. Cash is now king in evaluating a company's ability to withstand financial crises, the survey found. As well, corporate executives fear competition for capital from heavily-indebted governments. 'There's a fear that the window can shut at any point that's creating a semi-permanent fear mentality, the bunker mentality of continuing to create these fortress balance sheets,' said Harris. Royal Bank of Canada's RBC Capital Markets commissioned the Economist Intelligence Unit to conduct the survey.

2010/06/28 14:30=DJ WORLD FOREX: Dollar Up Vs Yen, May Fall Later This Week On US Data -3-
TOKYO -The dollar rose against the yen in Asia Monday as long-term investors bought the currency on its lows due to speculation that the U.S. Federal Reserve will hike its key interest rates next year while the Bank of Japan stays put. 'There are constant bids below the psychologically important mark of Y90 from long-term-investors who manage assets over a period of more than two years,' said Tsuyoshi Ueda, a senior manager at Gaitame.com, an online brokerage for individual Japanese investors. Still, Monday's trading does not suggest the greenback will keep rising, and dealers said it could even fall sharply later this week. That's because short-term investors--who were on the sidelines in Asia Monday due to a lack of fresh cues--are focusing more on U.S. economic data than the timing of the two central banks' next policy moves. If U.S. data due this week miss forecasts, U.S. Treasury yields and share prices could fall further, which will likely hurt the greenback, dealers said. U.S. data due later Monday include personal spending figures for May. A Dow Jones poll of economists forecasts spending may rise 0.2% in May from the previous month, when spending was flat. Markets are also waiting for key U.S. non-farm payrolls data for June on Friday. Some dealers also noted that the outcome of a summit of Group of 20 industrialized and developing nations over the weekend could weigh on the U.S. currency against its Japanese counterpart if U.S. data keep logging weak readings. The G-20 nations pledged to halve their deficits by 2013 and ensure their debt loads start to decline three years after that, but Japan was an exception to this commitment due to its huge fiscal burden. Governments' efforts to improve their fiscal conditions mean they won't be able to spend as much for any stimulus measures down the road, said Shinkin Asset Management senior manager Jun Kato. 'If the U.S. economy weakens but authorities have limited fiscal power to prop up the economy, that's clearly negative for the dollar,' he said. The dollar was at Y89.44, higher than Y89.26 New York last week. The ICE U.S. Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 85.328 from late Friday's 85.270. The euro, meanwhile, was at $1.2383 and Y110.76 from $1.2388 and Y110.56 in New York Friday. The single currency was higher due to Japanese importers' buying, dealers said, noting that the euro's outlook depends on share price moves.

2010/06/28 14:11=DJ FED WATCH: Natural Jobless Rate Seen Shifting Higher
NEW YORK -Somewhere out there lies a trigger point for Federal Reserve rate hikes.While that policy tightening may not come for many months or even years, economists still believe the key variable is the interplay between employment and inflation.That interplay, most economists believe, has changed in the wake of the worst recession in generations. Structural changes in the economy mean higher rates of unemployment will be the new normal. As a result, inflation could start to well up from levels of joblessness that until recently had been benign for price pressures.At the heart of the issue is what economists call NAIRU, or Non-Accelerating Inflation Rate of Unemployment. It's essentially the lowest level of unemployment that, if breached, will lead to rising inflationary pressure.NAIRU is tough to pin down, but even so, the concept has currency with many economists and Fed policy makers. Central bankers generally deal with the issue in a roundabout way, by talking about how much excess capacity the economy has. They also offer assessments of the output gap, or the difference between where the economy's potential growth is and where activity gains actually are. The more negative this gap is, the less inflation should arise.In this way NAIRU bleeds back into the debate over what the Federal Reserve will do with monetary policy. Economists are increasingly gravitating to the view NAIRU, roughly speaking, is higher than it once was. That means the Fed has less wiggle room: higher levels of unemployment may already be able to generate the sort of inflation central bankers need to counter with tighter monetary policy.The Fed itself doesn't make available a NAIRU forecast. The Congressional Budget Office, as part of making its own economic projections, does and puts the measure at 5% through 2020--about where it's been for the last couple of decades.Deutsche Bank economists believe NAIRU is on the rise. In a research note the bank said they believe the measure was at 5.6% in 2009 and could hit 6% this year. They tie the rise to the long-term nature of unemployment seen in the wake of the recession. Also, some industries, like the auto sectors, have cut back capacity for years to come. Extended unemployment insurance benefits also play a role, the economists said.UBS economist Drew Matus concurs that NAIRU is 'drifting a little higher' relative to the past, pegging it at around 6% to 6.5%.Economists' evolving view on NAIRU has at best a minimal role to play in the monetary policy game right now. May's 9.7% unemployment rate is very high and a long way from anything that will drive the Fed to end its near-zero percent interest rate policy. Indeed, this gap is a fundamental reason why so many forecasters believe the Fed can make it into 2011 without acting.That said, NAIRU isn't a problem-free concept. Calculating it requires an analyst to make assumptions about what the economy's potential growth rate is. In a real sense, NAIRU, like other rule-based policy tools, are rooted in things that aren't actually measurable, at least in something close to real time.'You might as well ask what is the tooth fairy's favorite color or what sound does a rainbow make,' said Ian Shepherdson, of High Frequency Economics. The NAIRU concept asserts the economy 'is permanently highly unstable' and is always a step away from a highly unstable inflation environment, the economist said, adding 'there has been no evidence to support this idea in the past 30 years.

2010/06/28 11:25=DJ UPDATE: Obama: Highest US Priority Is Strong, Durable Growth
TORONTO -Strong, durable economic growth is the highest priority for the U.S., President Barack Obama said Sunday at the end of a summit of leaders from the Group of 20 largest economies. While countries needed to assure skittish markets by planning credible deficit- and debt-reduction strategies, Obama warned they also needed to be careful not to harm a fragile global economic recovery by withdrawing stimulus spending all at once. 'Because durable growth must also include fiscal responsibility, we agreed to balance the need for continued growth in the short term and fiscal sustainability in the medium term,' he said. Obama said that while he welcomed China's recent vow to reform it's currency policy, he said the U.S. 'would be watching closely in the months ahead.' The undervalued yuan, also known as the renminbi, has given China a strong trading advantage, 'and we don't consider that acceptable or consistent with the principles of a balanced and sustainable growth,' Obama said. He added that while he didn't expect a huge appreciation in a week, the U.S. expects 'that theis going to go up significantly.' Obama also warned Sunday he would present the U.S. with 'very difficult choices' next year in order to meet its commitment to slash budget deficits and public debt. The U.S. vowed to halve its deficit by 2013 and stabilize its debt-to-gross domestic product ratio by 2016 as part of a G-20 effort to contain budgets and ballooning debt levels and ensure the global recovery remains intact. 'Next year, when I start presenting some very difficult choices to the country, I hope some of these folks who are hollering about deficits and debt step up, 'cause I'm calling their bluff,' Obama said. On global financial reform, the president said capital standards need to be of the highest global principles. 'In short, we have to do everything in our power to avoid a repeat of the recent financial crisis.' The G-20 on Sunday agreed to meet a 2012 deadline to implement new capital standards, the core of financial restructuring, but allowed for countries to slowly move towards an equalized standard over time. Some country requirements, for example, could be more lenient in initial years, but all would have to converge in time. On a geopolitically tense issue, Obama chastised China for what he called 'willful blindness' in not addressing North Korea's 'belligerent' and 'provocative acts, including the alleged sinking of a South Korean naval ship earlier this year. Obama said he would continue to press the world to ratchet up pressure on North Korea.

2010/06/28 09:33=DJ FOREX WEEK AHEAD: With Recovery In Doubt, Eyes on US
NEW YORK -With recent poor data and the Federal Reserve throwing doubt on the strength of the U.S. recovery, investors are wondering if this is a turning point for the dollar.Since the beginning of the year, investors have traded off the expectation that U.S. growth would outpace that of the euro zone and Japan. With that now in doubt, investors are particularly sensitive to the streams of economic reports and policy statements to determine whether they place short-term bets on the dollar, euro or yen.Though U.S. recovery is now in the spotlight, "that can change overnight," said Matthew Strauss, currency strategist at RBC Capital Markets in Toronto. "The moment we see significant developments out of Europe, that will become the driver of risk sentiment."Concerns over European sovereign debt continue to simmer, with the cost of insuring Greek debt rising. Analysts from UBS said a lackluster bond auction or negative reception to upcoming stress tests from European banks could send the euro tumbling against the dollar, erasing its recent gains. The expiry of the ECB's 12-month lending facility on July 1, with more than 400 billion euros to be returned to the central bank, will also be closely watched for any signs of difficulty. So far this year, the common currency has dropped about 13.5% versus the greenback, but has bounced back somewhat after touching on June 7 its lowest since March 2006 at $1.1876. The euro was at $1.2388 Friday afternoon, up slightly from 1.2328 late Thursday. The common currency will range between $1.21 and $1.24, analysts said.But only an exceptionally dramatic headline out of Europe would pull attention back across the Atlantic. While markets remain uneasy about European fiscal health, uncertainty about the health of the U.S. economy is the biggest factor keeping currency movements tentative.All eyes are on upcoming U.S. data, in particular, the U.S. June employment report due out July 2. Analysts are expecting non-farm payrolls to increase by around 120,000, "but there are rising concerns," said Camilla Sutton, currency strategist at Scotia Capital in Toronto. Markets could be more sensitive to a downside surprise than an upside one and a disappointing headline number could quickly send the dollar falling.Investors will also be watching for the June ISM Manufacturing Report and the progress of the sweeping financial-overhaul bill through both houses of Congress.Nerves are stretched thin after the Federal Reserve on Wednesday was slightly more cautious than expected about the U.S. recovery, labor market and European financial conditions. Other recent releases, including disastrous new home sales data and Friday's downward revision of first-quarter gross domestic product, also had investors wondering whether recovery will be sustained after the withdrawal of stimulus measures, putting pressure on the greenback against the safe-haven yen.Friday afternoon, the dollar was at Y89.42 from Y89.49 late Thursday, according to EBS via CQG. Analysts see the dollar trading between Y89.00 to Y92.00 in the next week.Looking ahead, investors will also be searching for clues from the People's Bank of China about the direction of its yuan policy after the recent decision to allow the currency to float more freely.That decision took some of the political pressure off China ahead of the weekend's Group of 20 summit in Toronto, and made it unlikely that currency policy will make it onto the agenda. Investors will instead be watching for comments from world leaders about a global bank tax and other regulatory measures as well as the debate over stimulus versus monetary tightening.