Previous Session Overview
The dollar and euro fell against the yen in Asia Wednesday as Japanese life insurance firms and major U.S. banks sold the currencies to lock in profits after their overnight rises.
The yen's recent strength has fueled speculation that the Japanese government could pressure the Bank of Japan to take more monetary easing measures to prevent further rises in the currency. Local media have reported that Japanese Prime Minister Naoto Kan will meet with Bank of Japan Gov. Masaaki Shirakawa Monday. While Japan's central bankers don't think the yen's rise poses an immediate threat to the economy.
At 0450 GMT, the dollar stood at JPY85.42, down from JPY85.50 late Tuesday in New York.
The euro was also lower, at JPY109.78 at 0450 GMT from JPY110.12 late Tuesday in New York.
The drop came in part as worse-than-expected German business sentiment survey overnight prompted market participants to sell the common currency, dealers said. Expectations for Germany's economy worsened in August, according to a survey published by the ZEW economic research institute, raising concerns that the driver of Europe's growth could falter ahead.
The euro traded hands at USD1.2851 at 0450 GMT, down from USD1.2879 late Tuesday in New York. The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 82.343 compared with 82.236.
The British pound gave up yesterday's gains against the dollar as inflation came in as expected, dropping -0.2% vs. the previous 0.1% for July.
The Australian dollar gave up its morning gains in the afternoon Wednesday, trading near where it ended Tuesday's session late in the day.
Market Expectation
European stock markets are expected to open slightly lower Wednesday, with investors looking to consolidate the previous session's bumper gains as caution creeps back.
EURCHF faces major technical resistance at the 1.3630 to 1.3652 level, says dealers. The pair has managed to hoist itself back above the 1.3358 to 1.3342 support area, and now has the 1.3510 late July low in sight, says dealers.
Dealers said the greenback and common currency could fall further against the safe-haven yen later in the day. Despite a recovery in share markets overnight in the U.S., investors are wary equities could soon slump again due to lingering uncertainty over the global economy.
Due to such caution, investors will likely continue to favor the yen, dealers said. The cool reaction of market participants in Asia Wednesday to better-than-expected U.S. industrial production data released overnight highlighted how that caution may continue to hurt the dollar against its Japanese counterpart.
Most Important Events Of The Day
| IS | Sedlabanki interest rate announcement and release 2010/3 Monetary Bulletin | | | Low | | | |
| AU | Westpac-MI Leading Index | Jun | % m/m | Low | 0 | | 0.23 |
| EU | ECB governing council member Honohan speaks at European Chamber of Commerce in China | | | Low | | | |
| AU | DWER Skilled Vacancies | Aug | % m/m | Low | | | |
| AU | DEWR Skilled Vacancies | Aug | % m/m | Low | -0.3 | | 0 |
| AU | Wage Price Index (WPI) | Q2 | % q/q | Low | 0.8 | 0.9 | 0.9 |
| AU | Wage Price Index (WPI) | Q2 | % y/y | Low | | | 3 |
| JP | Leading indicator (Final) | Jun | index | Low | 99 | | 98.9 |
| SE | Industrial Capacity | Q2 | % | Low | | | 84.9 |
| SE | Industrial Inventories | Q2 | SEK bn | Low | | | |
| GB | BoE release minutes of prior (4th & 5th August) MPC meeting | | | Low | | | |
| NZ | PPI (Inputs) | Q2 | % q/q | Low | | | 1.3 |
| NZ | PPI (Outputs) | Q2 | % q/q | Low | | | 1.8 |
International Trading
