Daily Forex Overview

Previous session overview

The yen gained against the dollar and euro in Asia Tuesday as weak regional share markets curbed players' risk appetites and prompted them to buy the Japanese currency, which they consider a safe-haven asset.

EUR drifted off the USD1.3670 recent high early Europe to USD1.3560, recovering to USD1.3600. Currency speculator George Soros' comment that the USD should not weaken much further against the EUR helped the stall in risk currencies. The ECB's Trichet said that non-standard policies would remain for as long as needed.

The Sterling pulled back fairly sharply helping the EURGBP to test 0.9000 on the topside. The Outlook for the Pound is becoming more mixed with the recent run up in Cable and GBPJPY in danger of a correction without fresh stimulus to continue.

The Japanese Yen continued to slip on the USDJPY even as the USD strengthened. Weak stocks are once again prompting strength in the Yen, especially in crosses such as EURJPY and GBPJPY.

The Australian dollar was weaker in Asia late Tuesday and off recent seven-month highs as the risk appetite-driven rally in global equities markets of the past week stalled.

Wall Street indexes eased back from their recent highs in U.S. trade Monday, checking any advance in higher-yielding currencies, which have traded in close correlation with the benchmark bourses.

Market expectation

Major currencies, including the euro, pound, dollar and yen, are little changed Tuesday as traders pause to assess the shifting sands in the markets.

Market players today are more bearish on the dollar-yen and the yen crosses than yesterday.

Players are focused on share market moves for now, analysts said, echoing other dealers, and are particularly sensitive to Dow Jones Industrial Average futures during Asian hours.

The dollar and euro may fall more against the yen if U.S. stock futures, which were off only around 25 points, slip more, analysts said.

EURUSD recovery extended to USD1.3629 on reported east European buys, with rate currently trading back around USD1.3615. Offers now seen placed to USD1.3630 with interest extending to USD1.3640.

USDJPY so far holding off the Asian lows through the early part of the European session, with Japanese bids still noted into JPY97.00. Technical traders also highlight the JPY96.80 area, representing trend line support taken from this year's Jan 21 lows. A break below here seen can expose the 38.2% retracement of the Jan-April rally at JPY95.97.

Investors in the Australian currency and bonds are awaiting the release of the federal government's budget for the fiscal year starting July 1, due later Tuesday.

While dealers expect share prices will likely dominate foreign currency trade decisions this week, players will also be watching U.S. retail sales for April due Wednesday.

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