Daily Forex Overview

Previous session overview

The euro rose against the yen and dollar in Asia Friday as Japanese short-term investors who have recently bet heavily against the common currency bought it back to hedge against the slight chance it may rise into next week.

But dealers said the euro-buying was merely a safety precaution before a three-day weekend in Japan. The currency may fall again in coming sessions on lingering concerns over Greece's fiscal woes, they said.

Elsewhere, the dollar edged up against the yen, trading hands at JPY90.45 compared with JPY90.33 late Thursday in New York. The slight rise came as stronger Japanese equities enabled overseas hedge funds and Japanese short-term players to buy the riskier dollar for the safe-haven yen.

The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies including the yen and euro, was up at 80.261 compared with 80.272 later Thursday in New York.

On Thursday, the euro sank to a one-week low against the dollar and the yen, dipping as low as USD1.3586, in a volatile session marked by talk that Greece could seek aid from the International Monetary Fund and chatter that the Federal Reserve could raise the discount rate. The Fed declined to comment.

The pound is little changed against the dollar and euro on Friday. It was initially supported Thursday on better-than-expected public finance data. But it was unable to get above USD1.5330 to re-test the upper line resistance at around USD1.5400 against the dollar on these numbers, ahead of next week's budget.

The Australian dollar was weaker in Asia on Friday while bonds also lost ground in thin trading conditions as offshore events remain the main drivers.

Market expectation

The outlook for the euro remains negative, The Japanese players buying the euro today are doing so just because the market will be closed Monday in Japan, and they don't want to be caught without any hedges just in case there would be any euro-positive developments while they're on holiday, said analysts.

But the common currency would likely be capped at USD1.3650 and JPY123.50 for the rest of the global day, said analysts.

The outlook for the euro in the coming weeks is bleak, as Greece appears unlikely to receive financial support from the European Union, dealers said.

Against the euro, the pound continues to benefit from the problems surrounding the single currency, pushing the euro lower as it looks to test support at 0.8920, dealers said. A break of this support could well push the euro back toward the 200-day moving average of 0.8850.

European stocks are expected to open slightly higher Friday, taking their lead from Wall Street, where the Dow Jones Industrial Average closed higher for the eighth consecutive session.

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