Daily Forex Overview

Previous session overview

The yen rose against the dollar in Asia Monday as Japan's prime minister and top central banker limited their dialogue on foreign-exchange matters to a telephone conversation. This lead investors to think that Tokyo may not take immediate action to tame the yen's recent strength.

Bank of Japan Gov. Masaaki Shirakawa and Prime Minister Naoto Kan on Monday morning discussed recent foreign exchange market movement as well as economic conditions at home and abroad.

A stronger yen is considered negative for the export-reliant economy because it deflates exporters' profits overseas when repatriated.

As a result, the dollar fell to JPY85.35 as of 0450 GMT, down from JPY85.77 in New York Friday.

The euro, meanwhile, was at JPY108.55 and USD1.2718 from JPY108.71 and USD1.2676 last Friday. Investors said the European unit's outlook depends on share price moves. If shares decline, the euro should extend losses against its major rivals.

The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 82.954 from 83.237 Friday.

The British pound extended its decline against the US dollar as concerns of a faltering global economic recovery boosted safe-haven currencies. Despite positive UK retail sales figures, the sterling continued to be pressured by the probability of further austerity measures implemented by the Bank of England.

The Australian dollar traded lower in Asia Monday after the country's general election on the weekend left it unclear who will govern, though the currency gained as the session wore on.

Market expectation

Dealers said investors may resume buying the yen actively if share prices deteriorate in Europe and the U.S. later in the day.

European stocks are expected to open higher Monday, managing a positive start after Wall Street closed off its session lows Friday and boosted by the mining sector, which rallied after the Australian general election result at the weekend.

EURCHF is set to test its all-time low of 1.3072 reached in July, though it should find psychological support at around 1.3000, say analysts. This is important support and should hold the currency pair, say technical analysts. If not, the longer-term 100% Fibonacci extension at 1.2997 will probably be reached.

GBP up slightly as short-term-focused investors take advantage of somewhat calm Asian session to square short positions they made recently; Japanese share prices managing to limit losses also a plus for GBP, say dealers. GBPJPY rises to JPY133.15 from JPY132.73, GBPUSD up at USD1.5595 from USD1.5553. Tips GBPJPY resistance at JPY133.30, GBPUSD may raise to USD1.5620. Investors will pay attention to euro-zone August PMI data due later in day for further trading cues; Economists tips headline figure to log 56.7; data due at 0800GMT.

Investors are likely to push the euro down further against the franc, said analysts, testing whether the Swiss central bank will intervene to stem its currency's strength, as had been the bank's recent practice.

Most important events of the day