USD/JPY Drops to 119.50 after BOJ Tankan

The dollar edged down against the yen in early Asian trade on Wednesday, after the Bank of Japan’s tankan survey of business sentiment showed that a weaker currency failed to improve Japanese corporate sentiment.  Confidence among big Japanese manufacturers held steady at plus 12 in the three months to March, falling short of economists’ expectations that it would rise to 14. Moreover, it was expected to worsen slightly ahead, the quarterly BOJ survey showed.

The dollar slipped about 0.2 percent to 119.90 yen JPY=, touching its session lows after the tankan release and moving back toward a one-month low of 118.33 yen logged on Thursday.  Later in the Asian session, China will release its official manufacturing Purchasing Managers’ Index, or PMI. The figure is forecast to edge down to 49.7 from February’s 49.9, according to the median forecast of 19 economists polled by Reuters, contracting for a third straight month and reinforcing expectations that Beijing will have to step up policy easing.

The euro added 0.2 percent to $1.0748 EUR=. The common currency marked the worst quarter in its 15-year history on Tuesday, skidding 11 percent against the dollar on divergent monetary policy expectations and investors’ fears about Greece’s finances.  For now, the euro is seen as stuck between $1.0500 and $1.1000 “as markets look to this side of the Atlantic for further clues to the dollar rally,” said Boris Schlossberg, managing director of FX Strategy in New York.