Afternoon Forex Overview

The dollar extended its rally Friday morning as U.S. stocks fell into the red and mounting concerns about Greece's debt problems hurt demand for riskier assets.

The euro was hit further, dipping as far as USD1.3512, the lowest since March 2, as the Dow Jones Industrial Average changed direction and moved into negative territory. The U.K. pound lost more than 1%, sinking below USD1.51 level. Commodities-linked currencies, particularly the New Zealand and Australian dollars, also took a hit as gold, oil and silver prices plunged.

Underpinning the flight to the safety of the dollar is increasing investor anxiety ahead of the European Union leaders' summit March 25 as it still isn't clear whether E.U. partners will provide financial aid to Greece, which faces more than EUR20 billion in bond refinancing in the next two months.

The dollar index, which measures the U.S. unit against a trade-weighted basket of six major currencies, rose to 80.534, up from 80.228 Thursday.

The dollar rose versus its Japanese counterpart to buy JPY90.68, up from JPY90.30 Thursday.

The Swiss franc, meanwhile, reached a 16-month higher versus the euro, a day after a Swiss National Bank policy maker was quoted as saying Switzerland should prepare for higher interest rates and a Swiss franc that responds fully to market pressures.

Market expectation

Pound flirts with support near USD1.5080 and stalls - Technical's notes that USD1.5083 is the 50% retrace of the move from USD1.4783 to USD1.5382. Traders say that this level is pivotal - otherwise a further slide to the March support line at USD1.4963 is favored.

The euro ate through solid bids in the USD1.3525/35 zone, with cross sell action weighing also. Traders said USD1.3520 saw bids but they expect further selling if US stocks sour more. Additional support seen at USD1.3490, but anything sub USD1.3500 will get people talking about a retest of the 2010 lows around USD1.3430-35.

Strategist say dollar-yen's sharp reaction to the US yield curve, in response to the latest discount rate speculation, suggests the pair is posed to press higher. Yen traders are counting down the days to fiscal year-end (March 31), with repatriation flows slowing further after this week (bulk already done).

Dukascopy Swiss FX Group

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