Daily Forex Overview

Previous session overview

The euro fell against the dollar and yen in Asia Thursday as weak economic data from New Zealand and Australia added to concerns over the fragility of the global economic recovery, prompting Asian hedge funds to sell riskier assets such as the common currency.

As the European Central Bank is widely expected to maintain its record-low 1.0% policy rate at the conclusion of a rate-setting meeting at 1245 GMT, the euro may remain weak for the rest of the day, dealers said.

Likely adding to the short-term downward pressure on the unit, ECB President Jean-Claude Trichet, is expected to say the euro zone's recovery will remain rocky when he meets the press at 1330 GMT, analysts said.

Traders said any gains were vulnerable to profit taking, given the worries about the state of the euro zone's peripheral countries, which weigh heavily on market sentiment, as the cost of insuring Portuguese sovereign debt against default reached a record high. This came after the country sold fewer treasury bills than expected at an auction. Greece's five-year sovereign credit default swap spreads also widened significantly.

The dollar traded hands at JPY90.90 at 0450 GMT compared with JPY90.95 late Wednesday in New York. The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies including the yen and euro, was at 79.398 compared with 79.359.

The dollar remained steady against the euro and yen after rallying Wednesday on a better-than-expected U.S. Automatic Data Processing jobs report. Traders said the focus in the currency markets remained squarely on Friday's U.S. nonfarm payrolls data.

At 0730 GMT, the euro was trading at USD1.3879, down from USD1.3893 late in New York Wednesday.

The Australian dollar dropped in Asia trade Thursday on a weaker-than-expected reading of retail sales in December, while the impact of a surprise decision by the central bank to keep interest rates on hold earlier in the week continued to flatten the yield curve.

Market expectation

EURGBP level remains under pressure into early Europe, with the euro continue to be pressured on the back of Greece, Spain and Portuguese concerns. Support seen placed at stg0.8725/20 ahead of stg0.8710, with interest from this latter level seen extending toward stg0.8700. Below here and rate can sink toward stg0.8685/80. Resistance remains at stg0.8765/70, with interim interest around overnight highs at stg0.8745.

EURUSD traders suggest Asian sovereign demand interest emerges in the mid USD1.3860's, some looking interest to protection of the much publicized option barrier at USD1.5850.

For Pound demand seen placed toward recent lows at USD1.5850, a break to expose another band of strong support at USD1.5935/30. Resistance seen placed at USD1.5900/10, more at USD1.5920/25.

European stock markets are expected to edge a little higher early Thursday despite sentiment remaining highly cautious as the euro zone's fiscal problems overshadow the monetary policy meetings of the European Central Bank and the Bank of England.

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