Daily Forex Overview

Previous session overview

The yen rose against the euro and dollar in Asia Tuesday after Federal Reserve Chairman Ben Bernanke wrote in a Wall Street Journal column that the central bank will need to tighten monetary policy down the road.

In the column, Bernanke said that "accommodative policies will likely be warranted for an extended period," but that the Fed "will need to tighten monetary policy to prevent the emergence of an inflation problem" as an economic recovery takes hold.

His comments made short-term players more risk-averse, prompting them to sell the euro and dollar for the safe-haven Japanese yen, as the Fed moving too early to end its loose monetary policy could hamper U.S. growth, dealers said.

The Euro with help from its crosses especially the EURJPY the EUR as stated above made a fresh leg higher into the USD1.42's running out of steam just before USD14250 but holding the level for the rest of the day. June German PPI at -0.1% vs. +0.5% confirmed that Producer Prices are falling at the fastest rate in 40 years as cheaper Oil and Higher Unemployment reduces demand.

Pound - comments hit the wires at the close Monday, with attention centered on Bean suggesting the current period of ultra-low rates being short-lived, which some interpreted as rates may be likely to be raised relatively quickly should the economic picture improve. Short-sterling futures were weighed down on the back of this, while cable pushed higher into the close, hitting in NY and ending around.

The Australian dollar was back above the USD0.81 figure in late Asian trade Tuesday as Wall Street forged new highs for the year, although the currency slipped from its intraday peak on comments from the U.S. central bank.

Market expectation

The euro is lower against the dollar Tuesday on a decline in U.S. stock futures but some dealers are looking for an entry point to go long with a target of around USD1.4335. Meanwhile, the yen is gaining on both of those rivals, and the pound under pressure against the majors.

Overnight trade saw sterling tracking the general move back in risk trades, though slippage was initially contained yet as euro-sterling held a tight range around. Early European dealing has seen cable dropping to, with stops now seen at risk on a break of . Euro-sterling bids still seen under, with the 21-day moving average seen as support at .

Eroding some of the currency's gains in local trade were comments from Federal Reserve Chairman Ben Bernanke that, while the central bank will need to unwind its recent policy easing eventually, rates are likely to remain near zero for the foreseeable future with economic conditions at present not warranting any near-term tightening.

European stocks are expected to open slightly higher Tuesday, continuing the buoyant tone seen in the U.S. and Asia, as investors remain optimistic about corporate profits and the chances of a global recovery.

Most important events of the day