Daily Forex Overview

Previous session overview

The euro rose to near a three-week high against the dollar in Asia Monday as strong regional share markets prompted short-term players to buy the risk-sensitive currency, dealers said.

In afternoon trade in Tokyo, the common currency rose to USD1.2905, its highest level since Aug. 18. The rise came as Japan's benchmark Nikkei Stock Average led gains in regional bourses, trading up 1.51%.

At 0450 GMT, the euro stood at USD1.2895, compared with USD1.2896 late Friday in New York. The euro and the dollar, meanwhile, were little changed against the yen, as players refrained from major bets ahead of the market closure in the U.S. for the Labor Day holiday.

At 0450 GMT, the euro was at JPY108.77 compared with JPY108.87 late Friday in New York. The dollar was at JPY84.33 compared with JPY84.43.

U.S. non-farm payrolls for August came in better than expected, easing speculation that a recovery in the world's largest economy could slow more sharply ahead.

In a very volatile finish to the week's trade the Pound recovered from a European sell off to bounce back from a low of USD1.5390 and finish on its highs at USD1.5465 against the Greenback. An unexpected decline in U.K Services PMI initially weighed on the Cable, however with risk appetite improving and the U.S dollar weakening across the board support came late in the session.

The Australian dollar nudged higher in a quiet Asia session Monday, with trading expected to remain subdued later due to a Labor Day holiday in the U.S.

Market expectation

Dealers said the greenback could remain in a JPY84.00-JPY85.00 range in the coming sessions.

Traders said the gains could continue through the week if equities remain solid.

That key psychological level may be difficult to break, however, given concerns that European sovereign debt problems could flare up again ahead.

With little economic data on the schedule this week, apart from unemployment on Tuesday, Swiss franc trading will be driven largely by appetite for risk, analysts said. With CPI data last week showing a slight monthly rise, the risk of deflation has receded further and market intervention from the SNB remains unlikely.

Risk-sensitive EUR higher vs USD as solid Asian equities prompt short-term players to buy common currency, with any continued strength in global share markets to lend further support in coming sessions; but EURUSD likely capped at psychologically key USD1.3000 for week, say analysts.

European stocks are expected to open higher Monday, as the positive momentum following the better-than-expected U.S. no farm payrolls data last week is set to continue.

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