Daily Forex Overview

Previous session overview

The euro fell to a 20-week low against the dollar in Asia on Wednesday as short-term players in the region reacted to more negative news on the euro-zone economy overnight, and to falls in Chinese share markets, by offloading the risk-sensitive common currency.

Data released overnight showed that Germany's ZEW economic expectations index fell for the fourth month in a row. The result hurt the euro by adding to speculation the European Central Bank may lag the U.S. Federal Reserve in raising interest rates, dealers said.

Also prompting the euro-selling was renewed concern over Greece's ability to overcome its fiscal crisis, dealers said. European Union finance ministers officially criticized Greece's economic statistics overnight, raising questions about the country's suitability for euro zone membership. Greece joined the EU in 2001.

Meanwhile, the dollar was unchanged against its Japanese counterpart at JPY91.15.

In the European currency markets, the euro and sterling were both weaker in early business Wednesday. The euro was trading at USD1.4206 at 0725 GMT, down from USD1.4288 in late New York trading Tuesday, after falling to a 20-week low against the dollar in Asia. The pound was quoted at USD1.6284, down from USD1.6362.

A surprise victor in a U.S. Senate election and concerns that Chinese banks are slowing lending pushed the Australian dollar lower against the U.S. dollar Wednesday, while a robust consumer confidence report hurt bond prices.

Market expectation

EURUSD dips back under USD1.4200 with traders noting Asian sovereign demand interest into the move, though rate manages to slip to USD1.4195. Earlier talk had placed Asian sovereign demand interest around the USD1.4180 level.

Lingering concerns over the fiscal health of Greece, a euro-member, could pressure the currency down to around USD1.4000 later this week, traders said. Dealers also said the euro would likely continue to languish Wednesday due to speculation that new limitations on Chinese bank lending could lead to further losses in the country's share markets in the coming weeks. Higher-yielding, riskier assets like the common currency and the Australian dollar would be the biggest losers in this scenario, they said.

EURJPY extends losses to JPY129.12 with traders noting demand interest placed toward JPY129.00. Tech traders note trend line support coming through at JPY128.80 (drawn from Jan 2009) and expect further demand to be placed here, more seen at JPY128.50.

USDJPY breaks back under JPY91.00 as yen picks up an early bid tone in Europe. Rate eases to challenge reported demand placed at JPY90.90, a break here to expose stops which if triggered to take rate on to JPY90.70. Demand seen here, with further demand seen placed down to JPY90.50 with more stops below.

European stocks are expected to open marginally higher Wednesday, following an upbeat session on Wall Street.

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