Daily Forex Overview

Previous session overview

The dollar regained some ground against the yen in Asia Wednesday, helped by Japanese investors' bargain-hunting and an easing in risk aversion due to rising regional stocks.

But traders expect the U.S. currency will likely stay below JPY100.00 over the coming days, saying Japan's exporters are waiting to sell their dollars around there.

During Asian hours, the greenback rose about a third of a yen to JPY97.70 from New York late Tuesday, recouping some of its one-yen losses overnight as Japanese investors bought it on the cheap, dealers said. Gains in Asian stock markets, led by oil and metal stocks after a surge in commodity prices, also hurt demand for the yen, which is considered one of the safest currencies, they said.

Euro briefly dipped to intra-day low of USD1.3853 in Asian session partly due to the news that U.S. government desired European banks to undergo stress tests to ensure their survival in the event the economy worsens. However, European officials were skeptical on the idea and euro rebounded from there.

The Pound recovered from fall on Monday which sent it to a two-week low against the dollar with traders breathing a sigh of relief as the political storm engulfing UK Prime Minister Gordon Brown appears to have calmed for now. Signs of stabilization in the UK housing market fanned renewed optimism that the economy may be over the worst, helping to support a climb higher against the dollar and the euro.

The Australian dollar rose back above USD0.80 in late Asian trade Wednesday, supported by a run of strong domestic economic indicators and an improvement in commodities prices.

Market expectation

The euro and U.K. pound are seen having a bit more upside Wednesday but traders are looking for a round of profit-taking after recent gains against the dollar, which nevertheless retains underlying weakness.

European stocks are expected to open marginally higher Wednesday, set to be led higher by oil and mining stocks after a surge in commodity prices.

EURGBP has extended the base to stg0.8605 in early Europe as cable again outpaces euro-dollar to the topside. Bids seen placed to stg0.8590 with stops below, which if triggered to allow for a retest of recent lows at stg0.8576. Bids noted from this level through to stg0.8570. Below here and rate can ease toward stg0.8550. Resistance noted at stg0.8635, more toward stg0.8650/55.

Market perception that expected US tightening may not come as soon as November, December now favored, seen reigniting inflation fears in the US and pressure on the dollar. Offers for EURUSD seen placed toward USD1.4120, with further interest seen dotted toward USD1.4135. A break above here can open a move on toward USD1.4170/80.

While offshore events continue to drive demand for the high-yielding currency, investor focus this week has turned to the domestic data stream with market participants awaiting employment data due Thursday for cues on interest rate expectations.

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