Daily Forex Overview

Previous session overview

The yen rose against the dollar and euro in Asia Thursday as weakness in Japanese stocks and lingering concerns over the ailing U.S. economy prodded investors to buy the safe-haven Japanese currency.

On Wednesday, EURUSD trading again showed no clear direction. There were no important eco data in Europe or in the US and the stock markets showed a choppy trading pattern, too. The euro gained some traction during the US trading hours and despite a late session correction on the US stock markets, EURUSD closed the session at USD1.3005, compared to USD1.2948.

On Wednesday, the pound fell sharply Wednesday following the U.K. government's annual budget statement, an exception to the generally narrow and uneventful trading that prevailed throughout the day for the dollar and other major currencies. Markets worried that the U.K. will face massive debt service costs once interest rates rise.

The Japanese Yen once again at the mercy of the stock market trying to rally in Asia before pulling back in the US session. EURJPY led the rebound but GBPJPY was very heavy to leave the outlook mixed. The IMF report released yesterday painted a bleak picture for both the global and Japanese economies.

The Australian dollar was slightly stronger in Asian trade late Thursday as currency investors shrugged off the negative mood in Wall Street, taking cues from stronger Asian equities markets. The domestic currency has managed to hold above USD0.7000 throughout the local session and is expected to remain fairly range bound.

Market expectation

The yen is gaining against the euro and dollar Thursday as traders again deal on risk aversion.

The yen may continue to strengthen versus the two currencies until the U.S. Treasury's decision on Chrysler LLC next week, as well as the results of "stress tests" being conducted on U.S. banks expected to be made public May 4, dealers said.

Recent positive sterling sentiment was knocked by Wednesday's Budget due to the borrowing requirements and the 'optimistic' future growth forecasts. Cable offers USD1.4600 (76.4% USD1.4660/1.4399), a break above to open a move on toward USD1.4630/35 ahead of USD1.4650/60. Support USD1.4525/20 ahead of USD1.4500. Below the figure and rate can extend toward USD1.4480/70 ahead of USD1.4450/40.

Any further pound weakness on Thursday could pressure the yen crosses still lower, dealers said.

Positive reversal in equities allowed yen pairs to recover, with euro-dollar moving back above USD1.3000 with rally boosted into early Europe, but falling just short of a retest on NY highs at USD1.3038 (USD1.3034). Rate currently trades around USD1.3025. Offers seen placed between USD1.3035/40, a break above USD1.3050 to open a move on toward USD1.3075/80. Support USD1.3010/00, stronger toward USD1.2980.

In the absence of any domestic data leads over the next week, the Australian dollar is likely to be driven mostly by risk sentiment and equities markets leads, say analysts.

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