Dollar pressured ahead of G7 meeting

The dollar came under broad pressure and slipped from a six-week high against the yen on Tuesday, as investors took profits ahead of a meeting of Group of Seven finance officials later in the week.

The USD has come under renewed pressure, reversing gains posted after the stronger than expected US March payroll release (180k, unemployment rate declining from

4.5% to 4.4%).

Dollar weakness has been reintroduced after ‘American Home’ reported a sharp decline in profits, warning that the prime mortgage market has been affected by the weakening housing market. So far, the FED has assumed that the subprime crisis can be contained, but with lenders now seeing the prime market affected, thus forcing a tightening of credit standards, additional negative effects on the housing market are in the making. Unsurprisingly, Friday’s US labour market release has been put on the backburner. The US earning reporting season starts this week and is likely to see further mortgage lenders providing profit warnings and announcing tighter credit standards.

Traders said this week’s big theme will be any yen-friendly comments leading up to Friday’s G7 meeting. G7 officials in the past have said yen weakness runs counter to Japan’s economic recovery and warned investors they could be burned making one-way currency bets.