Daily Forex Overview

Previous session overview

The euro extended its gains against the yen in Tokyo Tuesday as rising Asian share prices prompted foreign funds to buy the higher-yielding but riskier euro against the safe-haven Japanese unit.

Higher equity prices, with Japan's benchmark Nikkei 225 Stock Average up 2.7% in early afternoon trade, also encouraged short-term players to follow suit.

At 0450 GMT, the euro stood at JPY130.74 compared to JPY130.65 Monday in New York. The dollar, which earlier hit a near one-week high of JPY96.63, stood at JPY96.39, at par with the New York price.

The Euro found support at USD1.3420 before rebounding on USD weakness to finish broadly supported. Comments from Weber that he doesn't see positive growth until mid 2010 tempered enthusiasm for the single currency and EURUSD reached USD 1.3565.

The Sterling was one of the biggest gainers on the improvement in risk appetite gaining against the EUR, USD and Yen to finish near month highs on all 3 pairs. May Rightmove House Prices increased 2.4%. GBPJPY made large gains buoyed by the downgrade of Japans AAA debt.

The Australian dollar was firmer late Tuesday, whisked higher as global equities markets clawed back a large part of last week's losses.

Market expectation

The euro and dollar are little changed against each other on Tuesday, but are both higher against the yen.

Dealers said the yen had more room to weaken against the euro and dollar amid a slightly more anxious mood ahead of the release at 2350 GMT Tuesday of Japan's gross domestic product figure for the January-March period.

For the rest of the week, players expect the Japanese currency to have trouble regaining its strength earlier in the week, particularly ahead of a long holiday weekend for the U.S. and U.K., where the markets will be closed Monday.

Russian names were noted sellers into early Europe, taking the rate from above USD1.3560 down to USD1.3537, currently trading back around USD1.3550. Offers remain in place at USD1.3580, a break to open a move toward USD1.3600 with talk of stops placed between USD1.3600/10. Further sell interest then suggested from USD1.3620 through to USD1.3650. Support USD1.3530/20, more toward USD1.3500 ahead of USD1.3480.

The market focus is also on the U.S. housing starts data for April, due at 1230 GMT, with any better-than-expected reading likely to boost share markets and weigh on the yen against the dollar and on the dollar against other currencies, dealers said.

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