Morning Forex Overview

Previous session overview

The dollar and euro rose against the yen in Asia Thursday as short-term players sold the Japanese currency because of growing speculation that the government may soon engage in yen-selling intervention.

A pickup in Asian stocks also made players less risk-averse, prompting them to sell the safe-haven yen, dealers said. However, gains in the dollar and euro are likely to be limited as players remain cautious about the outlook for the global economy, they said.

The dollar rose as high as JPY84.89 Thursday, compared with JPY84.72 in New York Wednesday. The euro climbed to JPY107.86 from JPY107.06.

Japan's finance minister Yoshihiko Noda slightly tightened the tone of his remarks on the foreign exchange markets Wednesday, saying the government must take proper steps against the rising yen if necessary. Although he left it unclear whether he is considering intervention, investors took his comments as a sign that the administration is ready to act soon.

Also helping the dollar and euro were stronger Asian equities, which eased recent pessimism and dented demand for the safe-haven yen, traders said. The Nikkei Stock Average was up 0.5% in the Tokyo afternoon session, while share markets in Australia and South Korea also rose.

The European single unit was at USD1.2707 as of 0530 GMT, from USD1.2708 in New York Wednesday. The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 82.946 from 83.275.

The British pound reversed some of yesterday's losses against the greenback as it found technical support near the 50-day moving average at USD1.5368.

The Australian dollar continued to be pressured as risk aversion drove the equity and commodity markets lower. Furthermore, a report showed the world's largest economy expanded less than previously estimated in the second quarter, heightening concerns that global growth is slowing.

Market expectation

Players are focused on forthcoming U.S. economic data and Federal Reserve Chairman Ben Bernanke's speech on Friday to gauge the state of the world's largest economy. Players will also continue to pay close attention to any hints on currency intervention and monetary easing in Tokyo.

The dollar may not rise above JPY85.00 and the euro above JPY108.00 even if data on U.S. weekly jobless claims, due at 1230 GMT, come in stronger than expected, traders said. Economists expect jobless claims for last week to increase by 490,000, compared with a 500,000 rise in the previous week.

A shift in risk sentiment toward the positive side early Thursday should help support sterling against the dollar and euro. Yet any disappointment in the U.S. data could scramble that scenario later.

European stocks are expected to open higher Thursday, taking their cue from Wall Street, which rallied late in the session as investors decided that prices had fallen far enough to reflect the poor U.S. economic data seen in recent days.