Daily Forex Overview

Previous session overview

The dollar fell against the euro and the yen in Asia on Monday after an official newspaper of the Chinese central bank said China should cut its U.S. dollar holdings, adding to concerns over the unit's global reserve currency status.

The euro climbed briefly to a 14-month high against the US dollar after the Financial News, a newspaper backed by China's central bank, said the mainland should raise the proportion of euros and yen in its reserves by reducing its holdings of the greenback.

During morning trade in Tokyo, the People's Bank of China-affiliated Financial News reported that China should shift more foreign reserves away from the dollar and into the euro and yen.

The report encouraged Asian hedge funds and other short-term players to sell the U.S. currency for its European and Japanese rivals, dealers said. That sent the euro briefly to USD1.5064, refreshing its highest level since Aug. 11, 2008.

The dollar was also lower against the yen at JPY91.76 compared with JPY92.07 late Friday in New York. In addition to short-term players cutting dollar exposure after the report on Chinas foreign reserves, Japanese exporters were also selling the unit for month-end settlements, dealers said.

Sterling extended its sharp fall in the wake of data showing UK unexpectedly contracted in the third quarter, dropping below a key technical support level against the US dollar. The pound has been under heavy pressure since data showed UK GDP fell by 0.4 percent between July and September, way below analysts' expectations of a 0.2 percent rise.

The Australian dollar was weaker on Monday, although above its session lows, as traders bided time ahead of critical inflation numbers due on Wednesday.

Market expectation

The euro is gaining against major currencies Monday, although some players are looking to take profit on rallies on the view that it could slip back below USD1.5000.

For EURUSD offers said to remain in place to USD1.5065, a break above to open a move on toward USD1.5075/85 with area said to hold a mix of sell interest and weak stops, with larger stops said to be in place above USD1.5105, though offers to USD1.5100 expected to make upside progress sticky. A clear above USD1.5105/10 to expose USD1.5150, the level said to hold large digital option interest. Bids remain between USD1.4980/70 with stops below.

Leading up to the inflation data, analysts expect the Australian dollar to trade a tight range, with little to provide fresh direction.

European stock markets are set to open largely flat Monday, helped by an upbeat session in Asian markets overnight, despite Friday's triple-digit losses on Wall Street as investor enthusiasm waned ahead of corporate earnings reports scheduled for this week.

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