Previous Session Overview
The yen weakened slightly in Asia Tuesday after local media reported that Japanese Prime Minister Naoto Kan and Bank of Japan Gov. Masaaki Shirakawa will meet Monday, stoking speculation they could move to tackle the yen's recent strength.
The top officials are expected to discuss what to do about the yen, which is trading near 15-year highs against the dollar. Speculation is mounting that politicians, fearing that the yen's rise will hurt Japan's fragile, export-led recovery, might pressure the BOJ to ease policy further to weaken the yen.
The dollar, which slipped Wednesday to a 15-year low of JPY84.72, climbed about 20 sent on the report to JPY85.37. At 0525 GMT the U.S. currency was at JPY85.35 compared with JPY85.30 late Monday in New York.
At 0425 GMT, the European single unit was at USD1.2850 from USD1.2818 late Monday as players sold the dollar amid the recent downward trend in U.S. Treasury yields, denting demand for dollar-denominated securities.
The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 82.314 from 82.470 Monday.
The Pound hit day lows in Asia but was then bought on dips all the way up to USD1.5700 as the USD weakened and stocks rallied off lows in the US session. GBPJPY fell to lower JPY133 levels on weakness in the major.
The Australian dollar gained in Asia trade Tuesday on the back of rallying commodity prices, although strategists in the country continued to forecast an imminent pullback for the currency.
Market Expectation
The euro may fall to JPY109.00 and the dollar to JPY85.00 in the global day if the data disappoint, adding to expectations the U.S. economic recovery may slow ahead, traders said.
Economists say housing starts may rise 0.2% in July, compared with a 5.0% fall in June. Industrial output for July may gain 0.7% from a 0.1% rise the previous month.
Still, traders said the yen may resume rising later Tuesday. Recent weakness in share markets may weigh on players' confidence and encourage buying back of the yen, regarded as a safe-haven. Market participants will pay attention to how upcoming U.S. data affect equities.
European stock markets are expected to open modestly higher Tuesday, supported by some minor gains in the Asian session.
EURCHF holds above key technical support at 1.3260, a level which if breached could open to way to a decline to 1.3072. A drop through that level would be bearish and lead to the July low of 1.3072, and then the 1.3036 region would be in the pipeline, say technical analysts.
Most Important Events Of The Day
| US | Federal Reserve Bank of Governors, Federal Deposit | | | Low | | | |
| EU | ECB governing council member Honohan speaks at Renmin University in China | | | Low | | | |
| AU | RBA release minutes from prior (Aug 3rd) MPC meeting | | | Low | | | |
| EU | Current account (nsa) | Jun | EUR bn | High | | | -16.7 |
| EU | Current account (sa) | Jun | EUR bn | High | | | -5.8 |
| AU | Governor Stevens speaks on The Role of Finance | | | Low | | | |
| US | Building Permits | Jul | k | Low | | 579 | 583 |
| US | Housing Starts | Jul | k | High | | 560 | 549 |
| US | PPI | Jul | % m/m | Med | | 0.2 | -0.5 |
| US | PPI ex food and energy | Jul | % m/m | Med | | 0.2 | 0.1 |
| CA | Manufacturing sales | Jun | % m/m | Low | | -0.5 | 0.4 |
| US | Federal Reserve Board of Governors hold a public hearing on procedures for assessing a financial institution's performance | | | Low | | | |
| US | Treasury's Geithner hosts housing finance conference | | | Low | | | |
| US | Capacity utilisation | Jul | % | Low | | 74.5 | 74.1 |
| US | Industrial production | Jul | % m/m | Low | | 0.5 | 0.1 |
| US | Federal Reserve Bank of Minneapolis President Kocherlakota gives speech on "Inside the FOMC | | | Low | | | |
International Trading
