The last rally the dollar had versus the yen was sponsored by the Non-Farm Payroll report, showing fewer job loses than anticipated, and indications that the Finance Minister was urging the Bank of Japan to increase the money supply. This move has stalled short of the 91 level.

As the evidence continues to grow that the global recession has ended, the yen, because of its perceived safety, becomes less attractive. Yesterday's report that Chinese exports has surged in February to 46% above last year's levels confirms their recovery is progressing. Today we get a number of Chinese reports, including Industrial production, forecasted to be up 19.5% and retail sales up an amazing 18.3% from year ago numbers. As one of China's biggest trading partners, Japan will benefit from the increased activity, but their recovery seems to be lagging.

There has been much talk about the decline of the dollar as the world’s favorite currency, but not among hedge fund managers. The greenback remains their favored currency by a wide margin, according to a new survey.

Fifty-seven percent of those responding to the TrimTabs Investment Research/BarclayHedge Currency Survey are bullish on the dollar over the next three months. The Brazilian real was a distant second, favored by 11.5%, followed by the yen and “other” currencies, among them the Australian dollar, with 8.2%.

Last week, the BoE decided to leave rates unchanged at 0.5% and to forestall expanding on its GBP 200bn asset-purchase program, which was widely anticipated by the whole of economists in the Bloomberg consensus. It was hard to see any reason for the BoE to change the outlook for monetary policy in the short term, having decided to pause the program in February.

The latest economic data confirmed that the wait-and-see stance recently adopted by the BoE is appropriate. Over the last week, GDP growth in Q4 was revised upwards from 0.1% q/q to 0.3% q/q; the CIPS Manufacturing Index remained well above 50 in February (56.6, unchanged from January); and the CIPS Services Index rose from 54.5 in January to 58.4 in February. However, these data confirmed that the UK economy is likely to grow at a moderate pace in the next few quarters and will not recover the pre-crisis growth trend for many years, as BoE’s Governor Mervyn King stressed in the press conference for the presentation of February’s Inflation report.