Previous session overview
The dollar’s sell-off against higher-yielding rivals is taking a pause at the close of the week.
After eight consecutive sessions of dropping, first to nine-month lows against the euro and then to one-year lows, the dollar is finding some support.
The greenback has also firmed against the yen, after falling to a seven-month low earlier in the week.
Overnight, Japan’s new finance minister, Hirohisa Fujii, toned down his strong-yen stance, saying the currency’s exchange rate should be set in line with economic conditions and the government shouldn’t comment on them.
Equities and oil prices have also stalled Friday, leading some flows back into the financing currency, the dollar that funded riskier bets.
The Canadian dollar early Friday has retreated from the new year-to-date highs it achieved Thursday, in response to the pullback for equity and commodity prices overnight and the mild increase in risk aversion to end the week.
Market expectation
The dollar is the major funding currency now, eclipsing the traditional role of the yen, because the cost of borrowing longer-term U.S. dollars in the London interbank market is at record lows.
But ahead of the Federal Open Market Committee meeting next week, traders are on guard.
Analysts also say the dollar may be strengthening in a minor technical correction and ahead of a three-day holiday in Japan beginning Monday.
EURUSD chops back and forth inside a 15 pip range atop USD1.4700, tracking cable shenanigans on a very quiet day. Bids remain around the USD1.4640, offers USD1.4750, above the overnight high, plenty of room to play but little enthusiasm for such.
Yen pressured a bit by apparent backtracking by new finance minister Fujii who now doesn’t want to be tagged as an advocate of a “strong yen” just 24 hours after signaling a hands off approach to FX and little concern over market driven yen strength. Overnight range parameters guide for the day, bids around JPY91.00 area of overnight low, more around JPY90.80. Offers JPY91.50 though stops reside beyond there.
EURGBP most recent recovery effort faltered around stg0.9009, just shy of early European highs at stg0.9011, with rate currently trading back around stg0.9000. Offers remain in place between stg0.9010/20, a break to open a move toward stronger resistance area between stg0.9035/40 (stg0.9037 May 11 high). Support remains in place between stg0.8980/70, more between stg0.8955/50.
Source: Dukascopy