Morning Forex Overview

Previous session overview

The euro fell against the dollar Wednesday in Asia as renewed concerns over European debt issues gave investors an excuse to take profits by squaring the currency holdings they had built.

The euro has been falling against the dollar in the past few days, as the market focus has returned to European sovereign debt problems, highlighted by the widening of Irish and Portuguese credit-default swaps.

The euro was at USD1.3761 as of 0450 GMT, from USD1.3772 overnight in New York.

The dollar was a tad weaker against the yen at JPY81.78 from JPY81.83 due to selling by Japanese exporters. But that is clearly higher compared with last week's levels of below the JPY81.00-mark.

The greenback's ascent versus the yen isn't healthy either, dealers noted, saying the rise is based on technical factors.

The U.S. currency's rise above JPY81.00 was largely due to the execution of automated stop-loss buying orders, and dealers don't rule out the risk of the dollar going as high as JPY82.50 if similar automated orders above JPY82.00 are triggered.

The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 77.768 from 77.742 in New York. The euro was at JPY112.56 from JPY112.72.

Sterling held on to gains against the dollar and reached its highest level in six weeks as British industrial output grew in line with expectations, while manufacturing came in weaker than expected. September's industrial output came in at 0.4 percent, while manufacturing came in at 0.1 percent vs. 0.4 percent.

The Australian dollar slid against the U.S. dollar in Asia on Wednesday as traders were tepid ahead of a slew of crucial Chinese data on Thursday.

Market expectation

Foreign exchange majors are trading in relatively tight ranges after the dollar's surge against the yen and the euro on Tuesday.

For the rest of the global day, investors will pay attention to an auction of U.S. 30-year Treasury bonds.

USD may resume falling if U.S. 30-year Treasury auction later in day turns out weak due to increased expectations of inflation in U.S. on likely rise in USD flows to economy from QE2 measures, say analysts. Higher inflationary expectations (could) mean lower U.S. real interest rates, and that should weigh on the dollar.

European stocks are expected to open lower Wednesday after U.S. stocks lost some of their recent gains Tuesday and as traders considered the implications of the forthcoming G-20 meeting in Seoul.