Daily Forex Overview

Previous session overview

The dollar and euro rose sharply against the yen in Asia Thursday as firm Asian shares lessened risk aversion, in spite of a weak Wall Street session. Speculation that Japanese funds may buy dollar- and euro-denominated assets this week also hurt the yen.

The U.S. currency climbed to JPY94.33 from JPY93.54 in New York Wednesday and the euro rose to JPY134.31 from JPY132.96.

The euro also rose against the dollar, to USD1.4247 compared with USD1.4211 in New York Wednesday. If the euro's strengthening against the yen continues to be faster than the dollar's rise against the Japanese unit, the European currency will likely continue to gain against the dollar, traders said.

The British pound fell against the dollar after a report showed UK house-price declines will persist until 2012. The London-based National Institute of Economic and Social Research said that house prices will slide as the economy keeps shrinking until the final quarter. The Bank of England's minutes showed that the nine-member Monetary Policy Committee voted 9-0 to keep interest rates steady at 0.5%.

Federal Reserve Chairman Ben Bernanke told a U.S. Senate panel Wednesday that the shape of the economic recovery depends primarily on the evolution of the labor market and the health of the American consumer. Bernanke added that Fed officials expect a recovery to start off relatively slow, partly because consumers are grappling with high debt and housing price declines.

Stronger commodity prices and risk appetite helped the Australian dollar higher Thursday, although analysts said its recent bullish run could soon head into technical resistance.

Market expectation

The yen is taking a beating Thursday from the euro and dollar on technical selling, while the latter pair are little-changed. The yen could see more losses later in the session.

The dollar and euro could get a further lift against the yen if Japanese trust funds in coming sessions put their money into overseas assets denominated in those currencies. The funds had said earlier to clients that they would buy overseas assets this week.

Meanwhile, the UK pound has built up some technical momentum and could make more gains against the euro and dollar Thursday.

Near term direction for the local unit will continue to be driven by stock markets and U.S. corporate reporting season, while bond futures are expected to remain under pressure.

Europe's major stock market indexes are expected to open little changed Thursday, as investors pause for breath after the recent buying spree and wait for further impetus from corporate earnings releases.

That could help push the U.S. currency over the next couple of sessions back above Y95.00, a level it has traded below since July 7.

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