Morning Forex Overview

Daily Forex Fundamentals | Written by Dukascopy Swiss FX Group | Dec 03 09 08:15 GMT |

Previous session overview

The dollar and euro rose against the yen in Asia Thursday on the back of stronger news from the U.S. financial sector, and on speculation that the European Central Bank may signal later in the day an intention to tighten liquidity conditions.

Also likely to continue weighing on the yen for the rest of the week is the view that the Japanese government may intervene to block any future sharp gains in the currency, analysts said.

In early morning trading in Tokyo, news that Bank of America will repay USD45 billion in aid to the U.S. government brightened the outlook for the U.S. financial sector. That prompted some short-term players to buy dollars for yen, dealers said.

The purchase came as players remained cautious over the possibility of Japanese dollar-buying intervention should the yen strengthen rapidly again. Prime Minister Yukio Hatoyama said Wednesday that one sided yen gains could not be left as is.

At 0450 GMT, the dollar stood at JPY87.79 compared to JPY87.40 late Wednesday in New York. The euro was up at JPY132.45 from JPY131.48.



The Euro struggled to hold the USD1.5100 and eased back to the lower USD1.50's. US stocks came under modest profit taking pressure when the FED beige book reiterated the risks to the US economy. EURJPY made solid gains on a weak Yen after more Government jawboning overnight. October PPI was +0.2% vs. 0.0% forecast in October.

The Pound continued to rally off dips and today was no exception as BOE member Dale stated he believed the UK economy had turned and inflation was now a risk going forward. Selling close to USD1.6700 capped the rally.

The Australian dollar was slightly stronger in Asia trading Thursday, supported by solid regional share markets, a stronger gold price and broad yen-cross buying

Market expectation

EURUSD trades to USD1.5121, despite reports of decent sell interest countering the move. Stops seen above USD1.5130, some suggest stops placed all the way to USD1.5150, with offers mixed in between USD1.5140/50.

Pound strong offer at USD1.6700 reported, said to be held by a UK clearer with good amounts transacted at the level. Some traders suggest that pressure to eventually tell and lift rate above. Rate currently trades around USD1.6698.

European stocks are expected to open higher Thursday following a mainly positive afternoon session in the U.S. and a strong performance in Asia, where the Nikkei 225 closed up 3.8% at its highest level since October 30.

A U.S. Treasury spokesman confirmed that Japan's top currency diplomat met with Treasury officials this week, a move that could signal Japan may be preparing to intervene in foreign exchange markets as it seeks to tame the yen.

Investors will also be eyeing the ECB's decision on its benchmark interest rate scheduled for Thursday, as well as comments by its president, Jean-Claude Trichet, following the rate-setting meeting.

Dukascopy Swiss FX Group

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This overview can be used only for informational purposes. Dukascopy SA is not responsible for any losses arising from any investment based on any recommendation, forecast or other information herein contained.