Daily Forex Overview

Previous session overview

The dollar fell to a fresh two-month low against the yen in Asia Thursday after U.S. Federal Reserve statements released overnight suggested that the American economy will take more time than expected to recover.

The U.S. unit fell to as low as JPY94.28, its lowest level since March 20, after the Fed lowered its 2009 U.S. gross domestic product forecast to a shrinkage of up to 2.0%, from the previous prediction GDP will contract somewhere between 0.5% and 1.3%.

Also weighing on the dollar against the yen were minutes from the Federal Open Market Committee's April meeting indicating that the Fed may make U.S. monetary conditions even easier by increasing the amount of securities it buys from the market, traders said.

The Euro moved from USD1.3600 to USD1.3800 on the back of the FOMC news and general increase in risk appetite. Failure from US stocks to finish positive took some of the shine off especially the EURJPY. April German PPI fell -1.4% vs. -0.2% forecast.

GBP rose from USD1.5475 to almost USD1.5800. The BoE minutes showed a unanimous vote to increase the size of QE, with some members favoring even more stimulus, noting a slow recovery was expected.

The Australian dollar held onto its gains in Asia Thursday, helped by a weaker U.S. dollar, while interest rate futures were mixed. The Australian dollar was quoted at USD0.7758, from USD0.7699 late Wednesday. Against the Japanese yen, it was JPY73.32 from JPY73.60.

Market expectation

The euro and U.K. pound continued to gain against the dollar on Thursday, and the euro-dollar break of USD1.359 can open potential for a move to USD1.40, say traders.

Traders said the USDJPY might test in the near future the important technical level of JPY93.55, a break of which could speed the U.S. currency's drop because of the many stop-loss orders placed below that level.

Some said the U.S. unit could eventually fall to as low as JPY90.00 if the JPY93.55 support level is breached.

Analysts said still rising risk appetite is pummeling the U.S dollar, boding well for the local currency to push higher.

The main European data for Thursday sees the flash PMI releases for May, including France at 0700GMT, Germany at 0730GMT and the main EMU number at 0800GMT. For the EMU data, the composite PMI release is seen improving to 42.3 after 41.1 last month, with manufacturing up to 38.5 and services up to 44.4. This would be a third consecutive uptick for the composite index in May, driven by further gains in both the manufacturing and service sectors.

A number of recent data releases have added to signs of a moderation in the pace of industrial decline within the region, Thursday pointing to another uptick in the manufacturing PMI.

Most important events of the day