Previous session overview
The dollar and euro rose against the yen in Asia Friday as Japanese importers bought the two currencies ahead of their month-end book-closing.
Dealers said Japanese players had bought vigorously in early Asian trading, sending the dollar as high as JPY93.86 and the euro to JPY134.94.
But the two currencies shed some of their gains in the afternoon as weak Asian share markets encouraged short-term investors to buy the safe-haven yen, dealers said.
EURUSD made a brief show above USD1.4400 in the US session, topping out at USD1.4405 after seeing earlier lows at USD14222, closing the day in the USD1.4350 area. Brief lows were hit into the Asian session at USD1.4343 before momentum accounts stepped in to buy euros, pressing the pair back up to USD1.4377. Further impetus was lacking with flows described as muted, slippage in Shanghai stocks denting sentiment, with euro-dollar subsequently easing back to USD1.4350 and remaining contained ahead of the European open.
The British pound was knocked lower after both weaker than expected business investment and consumer spending provided evidence the UK is still in recession mode. Thus, UK interest rates will stay low to restore the economy.
The Australian dollar rocketed higher on Friday while shorter dated interest rate futures spun into freefall as traders ramped up expectations Australia’s central bank could tighten policy much sooner than expected, possibly by October.
Market expectation
The euro, U.K. pound and dollar are recovering just a bit against the yen on Friday as traders square up positions. Earlier, traders said Japanese importers were buying both the U.S. dollar and the euro against the yen.
European and U.S. stock markets shifted little yesterday, and if they remain stagnant Friday, the dollar could tick down to JPY93.00 and the euro to JPY133.00, dealers said.
But economists say the long-term impact on foreign-exchange markets is unclear as players watch for how the DPJ will be actually carried out its policies.
EURUSD still trading around the USD1.4350 area at writing, some stops noted through USD1.4410, with offers then noted into the August highs just ahead of USD1.4450. Barrier interest said to reside there, more into USD1.4500. Bids are at USD1.4345/40 and USD1.4300 in small, a break below there set to find little in the way of support ahead of USD1.4220.
Views, ahead of the RBA’s monthly policy meeting next week, drove a bid tone in the local currency and caused strong selling in the front end of the yield curve.
Analysts are now awaiting the statement accompanying next week’s board meeting outcome to see if an October rate hike is indeed on the cards, and will also examine second quarter gross domestic product, buildings approvals and the trade balance – all scheduled for release next week.