Daily Forex Overview

Previous session overview

The dollar and euro fell against the yen in Asia Tuesday as weak Chinese stock prices stifled players' risk appetite and prompted them to buy the safe-haven Japanese unit.

The two currencies may fall further if European and U.S. stock prices fall later in the global day, but their fall is likely to be limited ahead of a two-day Federal Open Market Committee meeting.

The greenback fell to JPY96.65 from JPY97.11 in New York Monday, and is expected to decline further if European and the U.S. shares also show poor performance later in the day, analysts said. The euro also declined to JPY136.61 from JPY137.32.

The Euro pivoted USD1.4200 for most of the day until the sellers won out and forced the pair back to USD1.4100 supports. EURJPY selling capped the rebound as US stocks started to slip and sentiment shifted to profit taking. Many analysts are pulling there long EURUSD predictions given the price action over the last two days.

The British pound fell against the greenback on Monday as stock markets snapped two-day gains and also due to the fallout from the Bank of England's decision last week to expand asset purchases, which sparked concerns that the worst of the U.K economy has not passed yet.

A firmer U.S. dollar and weaker-than-expected Chinese data sent the Australian dollar to two week lows in Asia Tuesday, with further losses expected offshore, while shorter dated bond futures nudged higher.

Weighing on the local currency in particular is a fundamental shift in outlook for the U.S. economy as traders bet on an imminent end to the recession there, which in turn is driving a renewed bid tone behind the U.S. dollar.

Market expectation

A revival of caution ahead of the Fed's meeting is tipping the dollar, euro and pound lower against the yen, but the dollar is still viewed as a better bet thereafter.

Downside against the yen will likely be limited for now as players are unwilling to make aggressive bets ahead of the release of the statement from the FOMC Wednesday.

Analysts said this week's meeting of the Federal Open Market Committee will be crucial for near term bond and currency market direction, as any hawkish tones from the Fed would boost the greenback and weigh on the Australian dollar.

Euro-dollar back off again amid talk of stops under USD1.4100, though slippage was contained at USD1.4124, with subsequent trade then contained under USD1.4150 into the Asian afternoon. A break of USD1.4100 may expose light bids at USD1.4065/60, said to be stronger at USD1.4010/00. Offers back at USD1.4150/60 in small, more significant into USD1.4200/10.

USDJPY lower, last at JPY96.67 vs JPY97.11 in New York Monday, mostly due to players' position adjustment ahead of 2-day FOMC meet starting today; long-term trend remains upward as players somewhat less dovish on U.S. economy as recent jobs data turned out to be stronger than expected, say dealers. For now, important psychological, technical mark at JPY98.50 as moving average charts say that's tipping point, also many options players place sell-orders there as well as exporters' willingness to sell USD holdings there to settle accounts. If mark breached, USDJPY may rise toward 100.

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