Daily Forex Overview

Previous session overview

The dollar edged down against the yen and euro in Asian trading Tuesday, as investors awaited the results of the U.S. Federal Reserve's policy meeting later in the session and the Bank of Japan policy decision on Wednesday.

The selling prodded Asian speculators to follow suit, pushing the dollar as low as JPY89.97 in Tokyo afternoon trading, compared with JPY90.48 in New York late Monday. The euro also fell in tandem to as low as JPY123.24 from JPY123.69.

The BoJ has maintained its benchmark unsecured overnight call loan rate at 0.1% since December 2008 the same month Fed policy makers cut their federal-funds rate target to a range of 0% to 0.25%.

The dollar index, which measures the U.S. unit against a trade-weighted basket of six major currencies, slipped to 80.131 from 80.240 in late U.S. trading Monday.

The Euro fell back through USD1.3700 support as the market took profit after the rally failed at USD1.3800 on Friday. The Euro zone Finance ministers meeting failed to outline a Greece bailout package instead stating that such a package was not needed at the moment given the recent Austerity measures passed.

The Pound weakness returned with force in Europe falling from USD1.5200 to USD1.5020 in quick secession on GBPJPY selling and EURGBP buying. Concerns remain about UK politics and there are reports of heavy M&A pound sales.

The Australian dollar was marginally higher Tuesday in quiet trade which is not expected to liven up much until the outcome of the Federal Reserve's monthly policy meeting later.

Market expectation

Japanese central bankers are expected to discuss additional liquidity-boosting steps at their two-day policy board meeting, which started Tuesday. They will likely focus on a proposal to double the scale of a lending facility introduced in December, according to recent media reports.

The Fed will repeat its pledge that interest rates can remain at historic lows "for an extended period" following its meeting Tuesday, analysts said. But for the time being, the Federal Open Market Committee isn't likely to make significant changes to the wording of the statement.

EURUSD getting squeezed lower, as rate tracks cable slippage (similar scenario to Monday morning trade). Rate trades toward overnight lows at USD1.3659, a break to expose next support close behind at USD1.3655/50. Through here and rate can slip toward Monday's lows at USD1.3639, with talk of large stops placed on a break of USD1.3630.

USDJPY traders report a UK name in Singapore have been a large buyer of dollar-yen recently, the pair is taking a breather currently trading JPY90.25 after touching JPY90.35.

Pound traders report sovereign buy interest seen into the dip, though recovery efforts remain labored. Rate holding off traded lows at USD1.4977, currently around USD1.4990.

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