Morning Forex Overview

Previous session overview

Renewed threats by Japan's Minister of Finance Yoshihiko Noda to take 'decisive steps' to stop the rise in the yen failed to deter the market Thursday, but they at least stopped traders from pushing the currency to yet another 15-year high against the dollar.

After falling to its lowest level since May 1995 at JPY83.34 yesterday after similar remarks by the finance minister, the dollar managed to stabilize today, briefly climbing above the JPY84 level. At 0450 GMT it was at JPY83.77, from JPY83.92 in late New York trading.

The market was even less impressed with comments by Bank of Japan Gov. Masaaki Shirakawa, who defended the central bank's steps to date and rejected many of the more radical steps being urged on them, such as increased purchases of JGBs to help reflate the economy and break the deflationary spiral.

The euro fell against the dollar to USD1.2694 from USD1.2716, and dropped against the yen to JPY106.35 from JPY06.72. Traders said that the euro was starting to stabilize with concerns about European bank stress tests starting to recede.

The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 82.696 from 82.608 late New York.

The Pound rallied at the start of Europe on better than expected House prices. August Halifax HPI rose 0.2% and Industrial Output jumped 0.3% m/m. GBPJPY buying also kick in as USDJPY reversed direction in the US section and allowed GBPUSD to test USD1.5500.

The Australian dollar scorched its way to a four month high in Asia Thursday after sterling jobs numbers pumped the flames of another rate hike by the central bank before year end.

Market expectation

Foreign exchange majors are trading in relatively tight ranges, though the yen continues to tip a bit higher against the dollar, euro and sterling.

Many believe there will be no intervention until at least Sept. 14, when the leadership of Japan's ruling party is decided.

Other players are looking to U.S. weekly jobless claims data due later Thursday for further clues about the strength of the economy.

The pound is likely to hold in narrow ranges against the dollar and euro while seeing support from an uptick in risk appetite.

EURCHF held above record lows reached Wednesday and looks set to consolidate around current levels, analysts said. Upside resistance is at the 1.3147-1.3164 recent highs, though while capped here the market will remain directly offered, says technical analysts