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Daily Forex Overview

Thu, Dec 4 2008, 08:32 GMT
by Raivis Zile

Dukascopy Swiss FX Group

Previous session overview

On Wednesday, the dollar hit a six-week low against the yen, reviving speculation that Japan may consider intervention in foreign exchange markets to forcibly weaken its currency.

With oil prices declining and U.S. stock markets remaining volatile, the yen climbed as investors sold higher-yielding, riskier assets and bought back the low-yielding yen used to fund those bets.

A poor start on the European stock markets caused EURUSD to test bids in the low 1.26 area early in Europe and this area was revisited at the start of the US trading session. The euro rebounded in New York afternoon session on Wednesday as traders covered early short positions ahead of an anticipated rate cut by the ECB on Thursday. EURUSD traded with a low of 1.2604 and a high of 1.2740 before closing the day at 1.2715.

The British pound could pull back even further this week as Bloomberg News is forecasting that the Bank of England will cut rates by 100 basis points on Thursday. GBPUSD traded with a low of 1.4666 and a high of 1.4931 before closing the day at 1.4780.

The greenback rebounded from 92.53 to 93.30 versus the yen on cross selling in the Japanese currency as investors offloaded the safe-haven yen in favor of riskier assets.

The Australian dollar was marginally lower late Thursday, weighed down by slightly weaker stock markets in Asia but now moving towards narrower ranges on reduced volatility in financial markets.

Market expectation

The euro is lower Thursday against the dollar and both are falling against the yen.

Analysts say if the dollar resumes its downward trend against the yen in the coming days and goes below JPY90, concerns are sure to grow in Japan that exporters will be less able to sell their wares on global markets because it would make the products more expensive.

The European currency declined to a low of USD1.2658 from USD1.2701, weighed by speculation for big interest rate cuts by the European Central Bank and the Bank of England at their planned policy meetings later in the global day.

Analysts generally expect the ECB to bring its rate down to 2.50% from 3.25%, and the BOE to 2.00% from 3.00%.

Analysts say that Australian dollar appears to be consolidating in a USD0.6330 to USD0.6550 range with the swing in both currency and equities markets becoming relatively calmer in recent days.

USDJPY hits intraday low of 92.66 while EURJPY also touches low of 117.26, as Europe players sell in reaction to weak Asia shares, worries over fate of U.S. carmakers, says traders.

Most important events of the day

Published on  Thu, Dec 4 2008, 08:35 GMT