Daily Forex Overview

Previous session overview

The U.S. Dollar held small gains late Thursday as pessimism about the strength of the economic outlook put selling pressure on stocks and higher-yielding currencies. The currency had been lower earlier with stocks rising after the Federal Reserve Bank of Philadelphia's index on manufacturing jumped far more than forecast this month.

The U.S Dollar also traded higher against the Yen at JPY91.21, up from JPY90.84 Wednesday. The Dollar sank to a seven-month low against the Japanese currency on Wednesday. The Dollar's slide against the yen picked up pace after Japan's Finance Minister Hirohisa Fujii said a strong yen had advantages for the nation's economy.

The euro touched a one-year high against the dollar overnight as risk appetite increased among investors. Data from the European Union's statistics office Eurostat reported Euro zone exports continued to recover in July and drove the trade surplus higher than expected.

The U.K. pound weakened on comments from Prime Minister Gordon Brown at a summit of European Union leaders Thursday. He said countries should "continue and cement" their fiscal stimulus packages. Technical's also disfavor the pound.

The Australian dollar weakened in the Asia session Friday as Asian equities sagged, prompting some trimming back of long positions. The Australian dollar was quoted at USD0.8710, down from USD0.8765 late Thursday. Against the Japanese yen, it was quoted at JPY79.35, down from JPY79.81.

Market expectation

The dollar is edging higher against the euro, pound and yen as stock markets worldwide take a pre-weekend breather.

Investors might have taken the pause in the euro's recent rally to take profits on the common currency's recent gains, a move that would lend temporary support to the dollar, said analysts.

European stocks are expected to open marginally lower Friday, weighed down by weak sessions in the U.S. and Asia, as traders pause for breath and lock in some profits following the markets' strength this week.

EURUSD edged to USD1.4729 before settling around USD1.4720 into early European trade. Offers seen placed toward USD1.4750, with further sell interest said to extend toward the NY high at USD1.4760, more around Thursday's posted 2009 high at USD1.4768 ahead of the reported barrier at USD1.4775. Stops noted above here but further barrier interest at USD1.4800 expected to draw protective selling ahead. Support remains at USD1.4695/85, with stops noted on a break of USD1.4675/70.

In addition, anyone looking for a low-yielding currency to sell has a wide choice right now, including the dollar, which is now becoming widely touted as a new funding currency in its own right.

Moreover, many believe it's tough to try and seek profits from selling sterling against the U.S. dollar, because the greenback's own problems are likely to keep that currency pair stable.

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