Daily Forex Overview

Previous session overview

The dollar has come under pressure as major emerging market nations urged more diversity in the global currency system, another sign that big investors are growing restless with the greenback's dominance.

The euro gained back some ground against the yen and dollar in Asia Wednesday as stronger-than-expected share markets prompted funds and other short-term players to buy back the risk-sensitive currency.

Many of these players had been selling the euro in the early morning session on the view that Japanese stocks would fall after the Dow Jones Industrial Average closed down 1.25% overnight for its biggest two-day point loss since March, dealers said.

That selling pushed the euro down to JPY132.55 just before 0000 GMT, its lowest level against the yen in nearly three weeks. But Japan's benchmark Nikkei 225 Stock Average shrugged off the slide in U.S. stocks, trading up 0.8% in the early afternoon session, and prompting players to reverse their earlier bets against the euro.

Euro rose against the greenback as Medvedev suggested a need for a global reserve currency other than the U.S. currency ahead of BRIC summit. In European session, German posted much better-than-expected Zew sentiment data which came in at 44.8 in June, surging from 31.1 in May.

The sterling is up nearly a percent on the day after data showing a smaller-than-expected fall in UK inflation fueled expectations that the Bank of England may not need to continue quantitative easing much longer. Additionally, sterling's trade-weighted index hit a seven-month high, propelled as the UK currency rose to its strongest this year against the euro.

The Australian dollar was slightly stronger in late Asian trade Wednesday, supported by some late bids in the currency, which initially fell on the back of weaker global equities markets.

Market expectation

The euro is up slightly against the dollar, yen and pound on Wednesday, as a bit of risk willingness returns, at least tentatively.

Asian traders have noted that the area between USD1.3750/1.3650 holds decent demand interest, suggested to be from the same party. Offers seen placed toward USD1.3900, a break above to open a move toward USD1.3920 with interest seen from here and dotted toward USD1.3935. Support noted at USD1.3840, more between USD1.3825/20 ahead of stronger interest between USD1.3805/00, and mentioned area between USD1.3750/650.

Despite the euro's slight gains, dealers said its outlook for the coming weeks has been clouded by growing concerns over the health of euro-zone banks, highlighted by an announcement from the European Central Bank Tuesday that euro-zone banks will have to write down an additional USD283 billion by the end of 2010.

Analysts said currencies like the Australian dollar were struggling amid the downturn in commodity prices, and this may continue into the northern hemisphere summer as China's stockpiling slowed. But this would represent only a stalling of the broad uptrend in commodities. Summer weakness would represent an opportunity to establish medium-term long positions in these currencies.

Dealers said players are likely to stay focused primarily on stock market moves for the rest of the week. If the Nikkei heads higher again tomorrow and Friday, people may continue to buy back the euro, with knock-on benefits for the dollar against the yen.

Most important events of the day