Daily Forex Overview

Previous session overview

The yen touched a one-week low against the dollar in Asia on Wednesday as rising regional stocks and signs of healthy demand for U.S. government debt eased worries over the U.S. and global economies, boosting investors' risk appetites.

Japan's currency, which is widely considered the safest currency to buy at times of crisis, often comes under selling pressure when the outlook for global growth improves.

In addition to optimism over the U.S. and world economies, expectations that Japanese mutual funds are about to resume investment in overseas assets also hurt the yen, dealers said. Asian investors led the selling.

The dollar rose to a one-week high of JPY95.51, compared with JPY94.97 in New York late Tuesday, and dealers expect further appreciation ahead. The European single unit climbed one yen to JPY133.53.

EUR was sold until noon London on weak current account and industrial orders data, falling from USD1.4000 to USD1.3860, but rebounded completely after much better-than-expected U.S. consumer index, with the data also boosting U.S. equities as investors became more optimistic the worst of the global recession is over.

The Pound rallied sharply off European lows although settled comfortably below the key USD1.60 level. The banking sector rebound is helping the Pound to recover faster than other currencies with London a major financial centre.

The Australian dollar was stronger late Wednesday as rebounding risk appetite on the back of Wall Street gains emerged as a strong driver of higher-yielding currencies.

Market expectation

The dollar and the euro are higher against the yen, but doubts remain that the dollar's rebound will last long. The euro is holding even against the dollar.

Traders said the U.S. dollar drew help from a report in the Wall Street Journal that General Motors Corp. and the United Auto Workers had agreed to a new restructuring plan. The new version would give the union a significantly smaller stake in the company than previously envisioned, and leave the U.S. government owning as much as 70%.

The U.K. pound is carrying on its technical rebound against the dollar, and could reach USD1.60, around which selling may emerge. The pound is also higher against the euro yet also looks vulnerable to profit-taking.

EURUSD - rate initially followed euro-yen higher at the start of the session, but failed to reach last night's USD1.4023 NY high (USD1.4001 high so far) after running into rumored sell orders at USD1.4020, while larger interest is now seen at USD1.4040 region. The pair's subsequent pullback then sees it slide through USD1.3990, mild stops seen on the break below USD1.3980, for a USD1.3948 low, before a bounce follows, moderate bids now noted at USD1.3930, according to dealers.

Dollar-yen currently trades at JPY95.35, offers just ahead of early high at JPY95.50, capping gains for now, but break of these could then see the pair push on towards JPY95.80, where there are more buy stops said to be sitting.

European stocks are expected to open higher Wednesday, benefitting from the healthy tone on Wall Street Tuesday, as investors take comfort from some positive economic data.

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