Daily Forex Overview

Previous session overview

The yen rose against the dollar and the euro in Asia Friday, helped by strong factory output data released by Japan, but traders said whether the Japanese currency could climb further in days ahead is unclear.

Data from Japan's trade ministry showing that industrial production rose 5.2% one month in April the biggest gain since March 1953 - led Asian hedge funds and other short-term investors to buy the yen, dealers said.

The data added to hopes that Japan's export-reliant economy has left behind the worst of its recession, although other data issued in the day indicated that its domestic demand is deteriorating.

The dollar fell briefly to JPY96.25, down more than two-thirds of a yen from late New York Thursday, before recovering to around JPY96.50.

Euro fell to USD1.3793 against the dollar in Asian session before rebounding from there partly due to cross buying versus the yen and the release of better-than-expected German employment data (unemployment rate at 8.2% vs forecast of 8.4% whilst unemployment change also rose by a much lower-than-expected number at 1,000 in May vs forecast of an 67,000 increase).

The Pound traded briefly above the USD1.6000 level but ran into a wall of offers and pulled back. CBI distributive trades fell to -17 vs. -10 forecast. GBPJPY was incredibly well supported traded at fresh year highs of 155 Yen.

AUD tried to make a new weekly high after Sydney's close, but only managed 0.7870.

Market expectation

The outlook for the yen looks unclear because the currency markets still lack any clear sense of direction, said analysts. Currency traders' focus is changing around so often, so quickly - from stock markets to U.S. yields to economic data - that it's too risky to make long-term directional bets, they said.

Traders are waiting for revised U.S. gross domestic product data for the first quarter due later in the global day to gauge the state of the world's largest economy.

The euro is higher against the dollar, closing in on USD1.40, and both are lower against the yen, as the market renews its focus on dollar weakness, including from a technical standpoint.

EURUSD currently holds back around USD1.4000. Focus during the day will turn to end month MSCI fixing flows with trader's suggesting medium demand for dollars versus the euro. Despite this some tech traders already see potential for euro-dollar's rally to extend toward USD1.4200 (lot of barriers positioned here). Support seen placed at USD1.3960, with interest trailing down to USD1.3945. Stronger interest placed at USD1.3925/20. Offers placed at USD1.4015/25, USD1.4045/50.

Some traders were citing news that Korea's National Pension Service planned to lower its exposure to U.S. bonds. This may have prompted some selling of the U.S. dollar, though the Korean government didn't say how much the fund might reduce its U.S. bond exposure, or whether this would mean buying fewer bonds or divesting existing holdings.

Pound gets an added lift through early European posted highs at USD1.6021 on release of stronger than expected nationwide house price data, the rate extending highs to USD1.6025 and retaining a firm tone. Offers seen placed to USD1.6030, more toward USD1.6050.

Most important events of the day