Morning Forex Overview

Previous session overview

The dollar rose slightly against the yen in Asia Monday on buying by Japanese importers, while speculators kept to the sidelines to see how planned U.S. government bond sales in the days ahead would affect long-term U.S. interest rates.

Demand from Japanese importers helped the U.S. currency reach an intraday high of JPY91.79, in a relatively quiet Asian session ahead of Japan's New Year holidays, dealers said.

The dollar later slid back to around JPY91.60 on selling by Japanese exporters, but held above the JPY91.30 level seen at Friday's close in New York, they said.

The US Dollar finished the day lower against the Euro and other key forex counterparts as recently impressive US Dollar appreciation gave way to a noteworthy short-term pullback. Consistent with our recent calls for a near-term correction on exceedingly one-sided forex sentiment, the Greenback gave back ground through relatively illiquid holiday trading.

Empty economic calendars for most of Western Europe made for relatively uneventful trading for the Euro and British Pound. Yet regional equity indices finished the day at fresh 2009 highs as financial market risk appetite remained buoyant heading into year-end.

Market expectation

The dollar is nudging higher against the euro, pound and yen on Monday ahead of the U.S. Treasury's big auctions this week.

The greenback's longer-term perspective is positive, Tokyo dealers said, adding that the dollar may resume rising soon as auctions of U.S. Treasurys this week are likely to fuel investors' appetite for the currency.

Traders said the near-term outlook for the U.S. currency depends on whether, and by how much, the coming Treasury bond auctions cause long-term U.S. borrowing costs to rise.

EURGBP, economists warned that the pound is on the brink of sinking below parity with the euro due to the U.K. government's unconvincing plans to tackle Britain's GBP178 billion budget deficit.

The EURUSD rose from an early low of USD1.4354, and is now trading at USD1.4375; with bids cited around the USD1.4350 mark providing support and stops are said near USD1.4280. Offers are above the morning high at USD1.4400, more sell orders seen on any approach towards USD1.4450, dealers say.

Traders will scrutinize the U.S. Case-Shiller home price index for October and the U.S. Conference Board consumer confidence index for December, both due Tuesday, for more hints on when the Federal Reserve may begin to lift short-term rates.