Daily Forex Overview

Previous session overview

The yen rose slightly against the dollar and euro in Asia Wednesday as weak Japanese stocks prodded investors into buying the safe-haven Japanese currency, while some players took profits on a spike overnight in the European unit.

During the Asian session, which dealers said was quieter than usual ahead of the data release, the U.S. unit declined a third of a yen to JPY94.97 compared with New York late Tuesday. The euro fell a little less than a third of a yen to JPY136.85.

Against the yen, the euro faced relatively greater selling pressure compared with the dollar because traders sold the common currency to lock in gains after it rose to JPY137.70, ten-month high, dealers said.

Euro moved sideways on Tuesday after retreating from a multi-month high of USD1.4445 formed on Monday. Euro zone PPI came in at 0.3% compared to economists' forecasts of 0.2% and the market reaction to the data was somehow muted.

The British pound rose near a nine-month high against the dollar as positive data helped increase risk appetite. Domestic house prices rose 1.3% in July, which was much better than forecasts of a 0.2% increase. Manufacturing also expanded for the first time in more than a year in July as it climbed to 50.8 from a revised 47.4.

The Australian dollar was marginally weaker late in the Asian session Wednesday, weighed by a late downturn in equities markets and capped below recent peaks ahead of crucial employment and central bank updates due later this week. The Reserve Bank of Australia moving its policy stance to neutral from easing Tuesday was expected by market participants and slightly less pronounced than some investors may have been hoping for.

Market expectation

The yen is a bit higher against major rivals Wednesday as stocks markets continue to consolidate.

Some traders noted that whether the yen's rise has staying power is uncertain. With sentiment toward the world economy improving, the currency could fall back if key economic data due later in the global day paint a rosy picture for the U.S. economy, they said.

From now traders will be closely watching for the July jobs data from payroll giant Automatic Data Processing due at 1215 GMT, and the non-manufacturing index for the same month from the Institute for Supply Management at 1400 GMT.

Economists surveyed expect the employment data to log 350,000 job losses in July, compared with 473,000 losses in June. The ISM index is expected at 48.2 in July, up from 47.0 in June.

Euro break of USD1.4500 to USD1.4505 could trigger another rally, say currency analysts, and the unit should climb toward USD1.50 over the next couple of months.

European stock markets are expected to open higher Wednesday, benefiting from a positive close on Wall Street Tuesday, but gains are likely to limited as investors watch corporate earnings, particularly from the banking sector, with caution.

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