Currency Market Summary :

The dollar fell back below JPY90 for the first time since mid December in Friday’s Asia trading session as the Japanese currency also hit a 9 month high against the Euro as investors rushed to buy Japanese equities as the Nikkei 225 traded 2.6% lower.  Investors buy and hold Japanese equities for a short time on speculation that the Yen may rise (BOJ notwithstanding).  Earlier in the trading session the US dollar fell to JPY89.78, its lowest since 18 Dec while the EURJPY fell to 126.55, its lowest since 28 April.  As of 05.00 GMT the dollar stood at JPY89.96 from JPY90.33 in NY Thursday while the Euro was at JPY127.09 from JPY127.27.

By 0720 GMT, the euro was trading at USD1.4136  from USD1.4104 in late NY trading Thursday, and Sterling was at USD1.6241, from USD1.6195.

An attack of risk aversion punished the Aussie dollar Friday as traders & investors responded to Obama’s plans to curb the banking industry, sending interest rate futures to their highest levels this year.

Currency Market Expectation:

The Euro is higher against both Sterling and the US dollar Friday but lower against the Yen (along with the dollar) as traders and investors reposition their trades to take account of the situation in Greece (debt problems), China (potential lending restriction) and now the US (plans to curb banks).  Risk tolerance is once again centre stage.

EURUSD short covering has led to some two way price action in early European trading with demand trying to overcome selling pressure.  A break above USD1.4150 could open a move towards USD1.4175/85.

The Yen is likely to keep on rising without BOJ intervention so long as foreign investors continue to buy Japanese equities although the dollar could fall below JPY89.00 as sell stops are triggered.

European equities opened lower, taking their lead from Wall Street and Asia as investors fret over Chinese monetary tightening and banking reform plans in the US.

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Previous Currency Trading Session Summary :

The dollar has advanced against most majors today and has been particularly strong against the euro amidst ongoing worries about Greek debt and further signs that Germany’s economic recovery may be losing momentum.  The dollar index (DXY) rose 0.4% to 77.456 & the USD was up 0.4% against the Japanese Yen, trading at JPY91.03.

The dollar also rose against the Canadian Loonie as the BOC (Bank of Canada) warned that the Canadian dollar’s “persistent strength” could act as “a significant further drag on growth.” Despite these comments the BOC kept the overnight rate at 0.25% and repeated its commitment to hold it there until the end of the second quarter.  USDCAD traded up 0.5% at USD1.0304.

The eurodollar traded at USD1.4296 – down 0.6%.  Losses were extended following the ZEW data which showed the index had fallen more than expected to 47.2 from 50.4.  The data reinforces concerns that the modest pace of recovery seen by Europe’s largest economy could be losing steam.  Furthermore, whilst ratings agency Moody’s said that Greece’s plan to cut its deficit more than 12% of gross domestic product last year to below the E.U.’s 3% target by 2012 was relatively well designed, at least the short term, they were unsure about the Greek government’s ability to implement the measures necessary.   Therefore Moody has kept a negative outlook on Greece.

Currency Market Forecast :

The US Dollar continues to gain as traders and investors adjust their expectations for global economic growth, deciding that it is US which is likely to continue to emerge from the widespread recession at a faster pace than the Eurozone.  EURUSD reached highs around USD1.4308 on the last push higher, from lift attributable to the bounce in EURJPY though flows in this pair described as modest. Stops above USD1.4305 cleaned out on the move and euro retreated to USD1.4285 once stops had been taken out.

USDJPY high print was JPY91.13 on the move higher as stops were flushed just above JPY91.05.

GBPUSD squeezing back up toward reported resistance at USD1.6380/85, as rate extends recovery off earlier pullback lows at USD1.6312. Move seen driven by EURGBP cross breaks under earlier low at stg0.8730, bringing pressure to bear on reported stronger support at stg0.8725/20 (low stg0.87225). Rate currently trades around stg0.8725. A break of stg0.8720 may expose stg0.8700. For cable, above USD1.6385 may open a move toward USD1.6400 ahead of USD1.6420/25.

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