Daily Forex Overview

Previous session overview

Massive dollar selling by big Japanese banks taking profit after the greenback's rise to a two-week high overnight pushed the currency down in Asia on Friday, but the rise may resume next week as sentiment remains buoyant.

The euro also fell against the yen due to similar profit-taking by banks.

Market participants sold the greenback after it rose to JPY95.30 overnight to take profits and adjust their holdings. It was the dollar's highest level since July 7, but it wasn't able to break above the psychologically important JPY95.50 mark.

On Thursday, the dollar ended mixed, rallying sharply against the yen on talk of investment outflows from Japan while retreating against the Canadian dollar and other risk-sensitive currencies as stocks and commodities advanced.

Earlier in New York trade, euro hit a seven-week high of USD1.4292 against the greenback as rosy U.S. corporate earnings fueled optimism on the economy and dented safe-haven demand for the U.S. dollar and the Japanese yen. The upbeat housing data also encouraged investors to buy higher-yielding assets. U.S. existing home sales data showed a 3.6% increase month-on-month compared to the consensus forecast of 1.5%. However, in late New York trade, euro tumbled to USD1.4118.

The British pound was stronger against the dollar as positive data increased risk appetite. Domestic retail sales rose 2.9% in June from the previous year, beating forecasts of a 2.1% increase. Retail sales were much better than the previous month's data, which were revised down to a decrease of 2.0% from a decrease of 1.6%.

The Australian dollar was weaker in late Asian trade Friday, as profit taking and weaker-than-expected results from Microsoft dented an otherwise spirited rally in high-yielding assets.

Market expectation

The euro and other majors are broadly mixed Friday, and may see minor moves until investors sort out which direction stock markets will embark on later.

European stocks are expected to open modestly lower Friday, with investors ready to bank the week's gains amid disappointing numbers from big U.S. technology companies which failed to meet market expectations Thursday.

Such greenback selling may push the dollar and euro down for the rest of the global day, but some dealers said the currencies may rise next week on the back of reviving risk appetite.

Some dealers said the greenback is expected to get a boost from Japanese trust funds Monday. These funds have been rumored to be preparing to invest in dollar-denominated assets very soon.

The euro declined against the dollar to USD1.4157 from USD1.4203 in New York on Thursday. Dealers said trading is lackluster, so it may stay in a USD1.4100-USD1.4200 range for the rest of the global day.

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