Daily Forex Overview

Previous session overview

The dollar fell to a one week low against the yen in Asia on Wednesday as weak U.S. economic fundamentals prompted investors to keep selling the greenback, despite renewed comments by U.S. Treasury Secretary Timothy Geithner that a strong dollar is in his country's interest.

Still, Geithner's remark a familiar line on the dollar failed to convince dealers to start buying the currency. As of 0450 GMT, the unit remained at a one week low of JPY89.38, nearly half a yen lower than JPY89.84 in New York Tuesday.

The dollar bought JPY89.75, down from JPY89.81 in late North American trading on Tuesday.

Japanese government data released early in the session showed the country's private sector machinery orders viewed as a key leading indicator for corporate capital outlays rose for a second straight month in September. Core machinery orders rose a seasonally adjusted 10.5%, far more than the 3.2% gain predicted by economists.

Yesterday the euro weakened against the dollar as some economic data came in lower than expected. The ZEW Center for European Economic Research said that Euro zone expectations of economic growth had a reading of 51.8, lower than forecast at 58.0. In Germany, Europe's largest economy, economic confidence came in at 51.1, lower than the previous reading of 56.0.

The U.K. pound mostly recovered from a warning Tuesday by an official with Fitch Ratings that the U.K. could be at risk of losing its AAA rating. Fitch later specified that the outlook for the AAA rating remained stable and there were no plans to downgrade the U.K.

The Australian dollar was higher late Wednesday buoyed by strength in regional equity markets and news of strong Chinese industrial production data for October. 

Market expectation

Dealers say the greenback will likely fall further due to the widely shared view that the Federal Reserve won't hike rates for months to avoid undermining the country's fragile recovery.

For EURUSD Asian report continues to mention sovereign interest placed between USD1.5020/30, while another says he hasn't heard that the interest remains. However, stops are placed on a break of USD1.5030, which if triggered to open a move toward USD1.5050/65 (USD1.5064 2009/Oct 26 high). A break expected to give rate an added boost. Support USD1.4970/65 ahead of USD1.4955/50 and USD1.4938. Mid East demand interest seen noted at USD1.4920. Large USD1.5000 expiry could keep rate close to this level through the NY holiday thinned session.

USDJPY - Sovereign demand for dollar-yen noted into European dealing as the rate attempts to regain the JPY90 handle. Asian traders say the strong bounce seen in the local session was likely driven by option expiries for the 3pm Tokyo cut. Attention now centered on the falling Ichimoku Cloud base at JPY90.17.

Many people also expect the Bank of Japan to keep rates low at 0.10% for some time, making the yen unattractive as well. But the medium-term prospects remain brighter for the yen relative to the dollar, said analysts.

Currency dealers will pay attention to U.S. economic reports, such as weekly jobless data due Thursday, to gauge economic conditions. The dollar's next downside target is JPY89.00 then JPY88.75, said several analysts.

European stocks are set for tentative gains Wednesday, after markets struggled to gain ground Tuesday and as an increasingly wary mood sets in. 

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