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Trading Currency - A Summary

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Forex Market Analysis − Morning Report

Thu, Aug 20 2009, 08:34 GMT
by Anna Coulling

Master The Markets

Forex Market Analysis - Yesterday & Overnight

A rebound in Asian stock prices sent the dollar and euro higher against the yen in Asia Thursday, but the rise is likely to be  limited as Japanese exporters were willing to sell the currencies to settle their accounts. The US dollar rose to JPY94.40 as of 0450 GMT from JPY94.00 in New York Wednesday, and the European unit rose to JPY134.28 from JPY133.80. Improved risk appetite on the back of firm Asian share prices led the U.S. and Asian short-term-focused hedge funds to increase their holdings of the risk-sensitive currencies, dealers said.

The euro hit a low of USD1.4084 against the dollar earlier in the day as the slide in Chinese stocks sparked anxiety over a global recovery and pushed investors away from riskier assets, but eventually rallied to USD1.4268 versus the dollar in New York afternoon as a recovery in equities and a jump in oil prices boosted investors' confidence.

The British pound suffered after the Bank of England's policy meeting on August 6 minutes revealed that Governor Mervyn King wanted a bigger increase in asset purchases. The minutes indicated that the BOE is expected to keep rates unchanged at record low of 0.5 percent for some time.

The Australian dollar was stronger in late Asian trade Thursday as an equities led recovery in risk appetite helped the higher-yielding currency regain ground lost earlier this week. The positive performance by Chinese stocks in the Asian time zone has been particularly supportive of the local unit given that it has also been the principal catalyst of Aussie dollar selling in recent weeks.

Forex Market Analysis - Outlook

The euro, the U.K. pound and the dollar are little changed against each other but all are higher against the yen. Shifts in risk sentiment will shape moves on Thursday though narrow ranges are likely to prevail. Fears are circulating that China, the linchpin for global economic recovery, may pull back some of its credit  easing measures, which could undermine recent signs of a turnaround. For now, forex traders expect the dollar will remain in a week old range between JPY93.00 and JPY96.00, and the euro may stay in the recent JPY132.00 JPY136.00 band against the yen.

Analysts expect the Australian dollar to stay between USD0.8150 and USD0.8400 over the next few days with demand for dips likely to limit downside potential for the currency. Nearer term resistance is likely around the USD0.8320 level.

The euro dollar is picking up talk that Asian accounts also have sell interest lined up a little higher from where the rate is currently (USD1.4240). Forex traders suggest that the currency market looks to be a mirror of yesterday in that Europe has come in with a risk on view only to be met by decent offers which could squeeze out the early entered longs. Yesterday we saw risk off trade in early business, squeezed later.

Published on  Thu, Aug 20 2009, 08:35 GMT