Currency Markets – Overnight Trading Asia
The dollar and euro fell against the yen in Asia Tuesday as weak Chinese stock prices stifled players’ risk appetite and prompted them to buy the safe haven Japanese currency once again. Both currencies may retrace further if European and U.S. stock prices fall later in the global day, but their fall is likely to be limited ahead of the two day Federal Open Market Committee meeting. The US dollar fell to JPY96.65 from JPY97.11 in New York Monday, and is expected to decline further if European and the U.S. shares also show poor performance later in the day with the euro also declining to JPY136.61 from JPY137.32. The Euro pivoted around the USD1.4200 price level for most of the day until the bears won out and forced the pair back to USD1.4100 . Euro yen selling capped the rebound as US stocks started to slip and sentiment shifted to profit taking. Many analysts are pulling there long euro dollar predictions given the price action over the last two days.
The British pound fell against the dollar on Monday as stock markets snapped two day gains and also due to the fallout from the Bank of England’s decision last week to expand asset purchases, which sparked concerns that the worst of the U.K economy has not yet passed. A firmer U.S. dollar and weaker than expected Chinese data sent the Australian dollar to two week lows in Asia Tuesday, with further losses expected offshore, while shorter dated bond futures nudged higher. Weighing on the local currency in particular is a fundamental shift in outlook for the U.S. economy as traders bet on an imminent end to the recession there, which in turn is driving a renewed bid tone behind the U.S. dollar.
Currency Market Outlook
A revival of caution ahead of the Fed’s meeting is tipping the dollar, euro and pound lower against the yen, but the dollar is still viewed as a better bet thereafter. Downside moves against the yen are likely be limited for now as currency traders are unwilling to make aggressive bets ahead of the release of the statement from the FOMC Wednesday. Analysts are suggesting that this week’s meeting of the Federal Open Market Committee will be crucial for near term bond and currency market direction, as any hawkish tones from the Fed would boost the US dollar and weigh on the Australian dollar.
The euro vs dollar is reversing lower once again amid talk of stops under USD1.4100, though slippage was contained at USD1.4124, with subsequent trades then contained under USD1.4150 into the Asian afternoon. A break of USD1.4100 may expose light bids at USD1.4065/60, said to be stronger at USD1.4010/00. Offers are seen back at USD1.4150/60 in small, more significant into USD1.4200/10.
The dollar vs yen has moved lower, last at JPY96.67 vs JPY97.11 in New York Monday, mostly due to players’ position adjustment ahead of the 2-day FOMC meeting starting today. The long term trend remains upward as players are somewhat less dovish on U.S. economy as recent jobs data turned out to be stronger than expected, say dealers. For now, the important psychological technical mark at JPY98.50 remains important, as moving averages on the daily charts suggest this is the tipping point. In addition many options players have also placed sell orders there as well as exporters’ willingness to sell US dollar holdings there to settle accounts. If this level is breached, the dollar vs yen may rise toward the 100 price handle once again.
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