Although market sentiment remains bearish for the dollar relative to the yen, a floor appears to be forming beneath the unit at around 105 yen.

A weak euro and signs of strength in U.S. economic fundamentals could presage a stronger dollar in the coming month.

As worries linger about Wall Street volatility, the dollar has recently been in a corrective phase against the yen.

Growing expectations of economic recovery in Japan have added to the upward pressure on the yen.

Much of the uptrend in the yen’s value could soon run out of steam, however.

In relation to the euro, the dollar has moved steadily higher into record territory.

The euro fell below 91 cents for the first time on the world currency market Thursday, down from the intraday high of $1.1886 it hit at its market launch on Jan. 4, 1999.

With the downtrend in its value continuing unabated, the euro fell to an all-time low of 90.54-90.64 cents in New York.

There is speculation that the euro will give further ground against the dollar and eventually fall below 90 cents.

Given worries about a possible rise in U.S. inflation, further Wall Street volatility appears inevitable, but the dollar’s strong showing against the euro could help shore it up against the yen as well.

The strength in the U.S. economy and widening interest rate differentials between Japan and the U.S., a typically bullish scenario for the dollar, will continue to play a role in daily market activity.

Indications are that U.S. investors have been busy unwinding their Japanese portfolios of late.

They have cashed in on profits on their equity holdings in Japan and sold yen for dollars to make up for losses on their home markets.

Also weighing on the yen’s value are concerns over intervention by the Bank of Japan.

However, the dollar’s topside may be capped by Japanese exporters’ sales at around 108 yen.

While Japanese investors remain in no mood to step up dollar purchases to buy foreign financial products, export-oriented firms appear poised to sell dollars to cover export claims when the unit climbs past the 106 yen level.

I expect the dollar to mainly trade between 105 yen and 108 yen in May.