Daily Forex Overview

Previous session overview

The greenback rose against a basket of currencies except the Japanese yen.

The yen hit multi-week highs against the dollar and the euro in Asia Tuesday as declines in Asian stocks spurred demand for the safe-haven Japanese currency.

The European currency declined JPY1.80 to JPY133.20 from New York late Monday, marking its lowest level since May 28. The greenback also dropped more than a yen to JPY96.52, a level unseen since June 5.

Euro fell against the dollar after Kudrin confirmed dollar's role as the world's main reserve. The report from U.K. Daily Telegraph on deepened credit crunch in Germany also weighed on euro in Asian session. In addition, euro zone posted worse-than-expected employment data. The single currency declined to as low as USD1.3755 against the greenback in New York afternoon before stabilizing.

Pound held up better than most but succumbed to USD strength. EURGBP broke through 0.8500 and supported during the day. A CBI report expects the UK economy to not rebound until 2010 and that expansion of the Quantitative easing program will be required.

The Australian dollar fell in Asia trade Tuesday and should weaken further offshore as safe haven asset buying gathers momentum, in turn prompting good support for interest rate futures.

Market expectation

If share markets continue to fall, causing risk appetite among investors to weaken further, the euro may fall toward JPY130.00 in the near-term, dealers noted. The effects of the euro's fall versus the yen could also drag the dollar lower against the Japanese currency, they added.

The U.S. currency's break below its recent JPY97.00-JPY99.00 range means that further selling pressure (on other major currencies versus the yen) could accelerate the dollar's fall against its Japanese counterpart, bringing it down to as low as JPY95.00 in the very near-term, said analysts.

European stocks are expected to open largely flat Tuesday, as investors pause for thought after Monday's hefty losses amid general concern that the hopes for a global economic recovery may be overdone.

EURUSD reported comments from Russian President Medvedev that world needs a new reserve currency (coming ahead of today's BRIC meeting) prompted leveraged names to buy back into euro-dollar, lifting rate to USD1.3840 in early Europe. Rate dropped back toward USD1.3810 only to pick up fresh buy interest with rate moving up to USD1.3842 at writing, but still holding off a retest of late Asian recovery highs of USD1.3852. As mentioned earlier, offers seen placed from above USD1.3852 through to USD1.3860.

Traders are focused on a summit meeting being held in Russia on Tuesday between leaders of the so-called BRIC nations - Brazil, Russia, India and China.

Most important events of the day