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The Bank of Japan will also be holding a monetary policy meeting, but with interest rates already at 0.5 percent, there is not much room for the central bank to move interest rates.

Earlier this week, Japanese business confidence fell to a 4 year low. Although workers are benefitting from higher wages, companies are beginning to grow more pessimistic. We believe that the shift in the corporate sector due to the recent strength of the Japanese Yen should force the Bank of Japan to downgrade their economic outlook. A lot of Japanese data will be released next week including the Eco Watchers survey and the trade / current account balance.

Downward pressures for the US dollar flared as fresh employment data amplified recessionary concerns, and spurred many investors to dump their holding of the troublesome currency. The US dollar took the biggest plunge against the Australian dollar as the currency rose above the 0.92 mark, and was followed by the New Zealand dollar as commodity prices gained. The US dollar also faltered against the lower yielding Yen as risk adverse investors pulled out of higher yielding assets, and added more losses against the Swiss franc as rising inflationary pressures stirred bets of a future rate hike by the Swiss National Bank. Against the European currencies, the US dollar weakened against the euro to bring the pair back above 1.57, while it appreciated against the British pound as market participants bet on a 25bp rate cut by the Bank of England next week. Meanwhile, the greenback picked up its biggest gains against the Canadian dollar as many investors speculate that the US slowdown will have negative implications for the Canadian economy.

The economic outlook for the US grows increasingly dim as employment situations worsen, with mounting fears that the US recession may drag out longer than expected. Job creation in the US declined for the third consecutive month as Nonfarm Payrolls fell to minus 80K from minus 76K – marking the biggest decline in five years. Manufacturing Payrolls added to the grim outlook as the index fell to minus 48K from minus 46K. Unemployment also spurred downside risks for the economy as it rose to 5.1 percent from 4.8 percent, and heightening the bearish sentiment for the economy.

Stock market investors showed surprising resilience as the rode out the mixed price actions, with the markets ending the week on a better note as it marked a weekly gain. As a result, the DJIA swayed back and forth throughout the session, but ended 16.61 points lower at 12,609.42, with GM and Verizon taking the biggest hit out of the big 30. However, the broader S&P500 rose 1.09 points to 1,370.40 points, with 116 stocks hitting a new 52 week high.

Mounting downside risk eroded the demand for high risk/reward investments, and led US Treasuries to advance as risk adverse investors moved into the safe have of risk free bond. As a result, the benchmark 10-Year yield dropped to 3.470 percent from 3.581 percent, while the 2-Year yield plunged to 1.827 percent from 1.887 percent.

Looking ahead, next week will bring an eventful week as three major central banks - Bank of Japan, European Central Bank, and the Bank of England – will meet to set their monetary policy, with the Fed’s Fisher speaking on the economy later in the week. For Monday, we do not expected major price actions as the Consumer Credit index is the only US data to be released, but expected to see US dollar volatility to picked up on Tuesday as the FOMC will release their Minutes report at 18:00GMT.

The Dollar rallied yesterday against the yen to reach a three week high, Cornelius Luca, economist at Global Forex Trading, adverts about the imminent end of this trend: “Dollar/yen surged further on Wednesday to reach a three-week high and this remains in line with my long model. Hold long positions carefully because the upside is seems to be in its final stages.”

Resistance and support levels, according to Luca stand as follows: “Immediate resistance remains at 102.30 from another 50-point pivot, which targets 101.80 and 102.80. This is followed by 104.10. Initial support is seen at 101.50. This is followed by 100.25 from a 50-point pivot, which targets 99.75 and 100.75. 101.25.”
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The US dollar was weaker versus the euro and the yen on Friday after the Labor Department reported that 80,000 jobs were lost in the United States in March, more than had been expected by analysts.

At just before noon in New York the dollar was trading at $1.5730 to the euro while it was at ¥101.7450 in relation to the yen.

The yen was helped by a retreat from carry trades as investor sentiment was hurt by the US jobs report.

The yen traded at ¥160.0398 to the euro.

The pound was down in relation to the euro and the greenback on worries that recession in the US could hurt economic growth in the UK.

In late morning trade in New York the pound traded at 78.82p to the euro and at 50.11p to the dollar.

Meanwhile, the South African rand declined versus major currencies on the avoidance of carry trades.

Earlier in the week the rand was stronger on signs that Zimbabwe President Robert Mugabe could be on his way out of power after elections there.

Mugabe has presided over a weakening of the Zimbabwe economy that has left the inflation rate there at 164,000 percent.

In New York around noon the rand traded at R7.8035 to the dollar and at R12.275 to the euro.

The U.S. dollar is heading for the fastest weekly gain in more than four years versus the Japanese yen as the financial markets get a feeling of relief from the crisis.

Yen was a favorite safe haven currency since the beginning of the financial crisis in U.S. and the global stock market slump. The low yields and the high security of the Japanese bonds attracted investors, making them to convert other currencies to yen. But when the fears are settling, the need in the low yielding securities declines and the yen turns to being the carry trade short base currency again.

Dollar is experiencing the downtrend against the yen since June 2007. From high of 124.13 per dollar yen rose to the bottom of 95.77. This week showed an extreme USD/JPY uprising as the yen was falling against the all major currencies.

USD/JPY rose from 98.81 to 102.37 (as of 9:14 GMT) this week. That’s a 3.6% weekly growth — the biggest gain since February 2004, when USD/JPY rose almost 3.7% in one week. Most of the gain came on Monday and Tuesday, when the markets reacted on the banks’ losses reports.