Afternoon Forex Overview

The euro held onto levels above USD1.50 early Friday in New York, and was little changed from its day-earlier levels after rising Asian stocks and strong euro zone economic data continued to stoke investors' appetite for the higher-yielding currency.

The Dollar Index, a trade-weighted basket of six currencies, was at 75.324, from 75.072 late Thursday.

The difference in yield between the beaten-down dollar and the high-flying euro also continues to play a key role in the demand for the currencies: Libor, the London interbank borrowing rate and a key interest rate for dollar borrowing, was fixed Friday at a record low of 0.28188%, down from Thursday's 0.28219%; the euro's three- month rate remained unchanged at 0.68813%.

The pounds sharp drop came as data showed the U.K. economy contracted by 0.4% in the third quarter; economists had expected growth of 0.1%, which would have been the first three months of growth since the start of 2008.

The pound had traded as high as USD1.6693 ahead of the data. The dollar jumped 2 cents against the sterling, improving to USD1.6370 from a 5-week low of USD1.6693. With the advance, the dollar moved back toward a 5-month high near USD1.5700.

Market expectation

USDJPY earlier JPY91.97 high under assault as euro-yen demand continues to provide lift via improved risk-appetite, the dollar to find offers to JPY92.00 as noted earlier. Beyond there, picture is mixed with offers and stops noted to the JPY92.21 area of the Ichimoku cloud base. Stops placed beyond there.

EURUSD sees light chop to lift the pair to USD1.5045 area from USD1.5015 with traders suggesting bounce may be fresh risk-appetite after upbeat Microsoft earnings. Pair stalls in the face of earlier reported supply at USD1.5050 area. Earlier dip to USD1.5015 absorbed known bids in the USD1.5025/30 area, exposes bids at USD1.5000.

Pound decent two-way interest noted as cable attempts to regain the USD1.64 handle following heavy losses seen in the local session on the back of disappointingly weak UK GDP data. Technical analysts suggesting the 100-day moving average should provide good support at USD1.6362 should the rate revisit the lows.

Investors are looking toward release of U.S. existing home sales in September expected to get one last boost from the expiring homebuyer's tax credit as an indicator of whether the U.S. economy continues its slow march to recovery, which could boost the euro higher; a disappointment could prompt investors to shift back into the dollar.

Dukascopy Swiss FX Group

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