Daily Forex Overview

Previous session overview

The dollar fell to a two-week low against the yen in Asia Wednesday following a Financial Times editorial saying the U.S. may be at a risk of losing a triple A rating for its government bonds.

The dollar fell to as low as JPY95.78 in the early Asian trading session, and dealers said a technical factor may even push it below JPY95 very briefly Thursday.

EUR made new recent high, from USD1.3600 to USD1.3710, but couldn't follow through, settling in the low 1.36's. ECB Weber's comment that there was no need to expand asset purchases into other debt types was supportive.

Sterling rose against the dollar after UK data showed jobless benefit claims rose by a smaller-than-expected 57,000 in April, beating forecasts of an 80,000 rise. The pound rose to a four-month high against the dollar to USD1.5354 in New York morning while it touched an intra-day high of 0.8915 versus the single currency before stabilizing.

A weaker U.S. dollar helped shove the Australian dollar higher in Asia Wednesday as traders await renewed direction from any signs the global economy may be stabilizing.

The Canadian dollar strengthened against the dollar after data showed Canada's March trade surplus was more than double what was expected.

Market expectation

The euro and pound are higher against the dollar Wednesday, indicating some lingering willingness to take risk.

Some traders attributed the U.S. dollar's fall in part to a report in the Financial Times that talked about America's AAA credit rating potentially being at risk unless the government put its finances in order.

The JPY will continue to fall as global risk appetite improves, according to several analysts. The correlation between equities, risk and the Japanese currency remains strong and resumption in the carry trade is more than likely. Some dealers said a technical factor related to foreign exchange options contracts could bring the dollar down below JPY95.

EURUSD traders note that a semi official name was seen with sell interest above USD1.3700 on the recent push higher. Rate currently trades back around USD1.3688 after being pressured back to USD1.3675 from USD1.3710.

Analysts say more dollar-selling is likely over the coming weeks, assuming that economic-recovery signs continue to emerge. But they also say the dollar's losses probably won't be steady or severe.

Pound bids seen placed between USD1.5280/75 (USD1.5277 38.2% USD1.5201/1.5324), a break below to allow for a deeper move toward USD1.5260/50. Stronger support seen placed at USD1.5230 ahead of area toward USD1.5200. Resistance seen placed USD1.5315/25 ahead of USD1.5350/60 (USD1.5354 NY high). Above here is January high at USD1.5374 moves into view.

Looking ahead, players will pay attention to U.S. retail sales data due later in the global day. The core figure which excludes auto sales may rise 0.2% on month in April, according to economists.

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