Daily Forex Overview

Previous session overview

On Tuesday, the dollar was dumped across the board as a strong rally in U.S. stocks encouraged some risk seeking, denting safe-haven flows into the U.S. currency. The dollar tends to perform well in a risk-averse environment, benefiting from its status as the world's No. 1 reserve currency.

Currencies in Australia and New Zealand were the biggest winners versus the dollar, both rising more than 3% for the day. The New Zealand dollar recovered from a six-year low hit Monday.

EUR rose from USD1.28 to USD1.30, despite weaker German retail sales and PPI inflation adding to the case for another rate cut at the ECB's March meeting. European auto sales were very weak.

The British pound surged versus the US dollar and Japanese yen on Tuesday due primarily to increased demand for "risky" assets, and the moves have left the door open for potential GBPUSD gains toward USD1.50.

The Japanese Yen was a major mover, weakening considerable on the back of the BOJ's plan to buy 1T Yen of the countries bank shares to help sure up the sector. Also helping crosses to rally was the large rally in European and US stocks.

The Australian dollar was firmer in late Asian trade Wednesday, supported by improved risk appetite in global growth asset markets while bond futures eased as investors come to terms with the government's dramatically increased bond issuance program.

Market expectation

The dollar edged back up in Asia Wednesday as its overnight fall in New York prompted some Asian players to bargain-hunt the currency, but many traders say its downside remains soft.

But the greenback could head south again if upcoming U.S. economic data turn out to be bad and sour market sentiment, dealers said. The dollar may fall below JPY89.00 later, if the January employments report from payroll giant Automatic Data Processing and the Institute for Supply Management's non-manufacturing composite index (1500 GMT) log worse than expected.

Meanwhile, players also await more trading cues from Europe, including euro zone retail sales for December (due later at 1000 GMT) and fourth quarter 2008 earnings from Deutsche Bank due Thursday. In anticipation of their poor showings, no one is buying Euros actively at this point, said analysts.

Most important events of the day