Dukascopy Morning Forex Overview – Sept 03 09

Previous session overview

The dollar rebounded against the yen after hitting another seven-week low in Asia Thursday as strong Shanghai share markets prompted speculators to buy back the U.S. currency in exchange for the safe-haven yen.

During early Asian hours, the greenback slipped to JPY91.94, its lowest level since July 13, as grim Japanese stocks and weaker-than-expected U.S. private-sector jobs data overnight spawned views that global economic recovery may be slower than previously thought, dealers said.

Weak Japanese share markets also dented demand for risk-sensitive currencies like the euro and dollar. Tokyo’s benchmark Nikkei 225 Stock Average index was down 0.4% in the early Asian session.

But later, the dollar recovered to as high as JPY92.38 – higher than JPY92.13 in New York late Wednesday – as solid Shanghai share markets boosted speculators’ risk appetite, dealers said.

The single currency traded sideways in Asian session and fell to around USD1.4190 in U.S. morning due to active cross selling versus sterling and yen, however, buying interest lifted euro from there on short-covering and greenback’s weakness and price rebounded to session high at USD1.4295 later in the day.

The British pound fell to a near 6-week low yesterday against the dollar, and hit it’s lowest since mid-July for the third straight day against the yen. The pound came under pressure vs. most major currencies as falling equity markets raised risk aversion, and on lingering concerns over the health of UK’s economy.

The Australian dollar was stronger late in the Asian session Thursday, buoyed by a run higher in the price of gold and strong economic growth data but capped ahead of the release of U.S. employment data.

Market expectation

The euro’s movements are narrow so far Thursday, ahead of the European Central Bank’s meeting, although RBS sees scope for a bit more weakness against the yen. The UK pound is also barely changed against major rivals.

Economists are expecting the European Central Bank to keep interest rates, as well as its additional policy measures, unchanged yet again at its meeting in the week ahead, staying in wait-and-see mode amid growing signs that the euro-zone economy is emerging from recession.

A positive open in Asian equities, led by the Shanghai Index, reversed this early tone, the snap back in yen crosses lifting euro-dollar to an overnight high of USD1.4283. Traders noted decent Asian sell interest above USD1.4280 overnight, but not linking interest to the most active Asian sovereign. Positive tone remained into early Europe, which has taken rate on to USD1.4288, but upside progress seen sticky with sell interest said to extend toward USD1.4320, with talk of stops building above USD1.4330. Demand remains in place to USD1.4250, a break here to allow for a deeper pullback toward USD1.4210, with bids said to be building here, interest extending to USD1.4190 (Wednesday low USD1.4193).

European stocks are expected to open lower Thursday, weighed down by a negative close on Wall Street overnight, as investors adopt a cautious stance ahead of the European Central Bank’s monthly news conference and Friday’s key U.S. employment report.

The U.S. Department of Labor issues its non-farm payrolls data for August Friday with economists expecting the unemployment rate to rise to 9.5% from 9.4% in July and 233,000 jobs lost in the month.

Source: Dukascopy