Friday, July 8, 2011

Forex Morning Overview - July 8, 2011

Previous session overview
The dollar edged up against its major counterparts in Asia Friday as investors speculated that a key monthly U.S. jobs report later in the global day will come in strong, after separate employment data Thursday showed the labor market firming more than expected.

At 0450 GMT, the dollar was up at JPY81.27 from JPY81.24 late Thursday in New York. The common currency was at USD1.4338 at 0450 GMT, down from USD1.4359.

The ICE Dollar Index, which measures the greenback against a basket of currencies including the euro and yen, was up at 75.003 at 0450 GMT from 74.913 late Thursday in New York. 

Risk-sensitive Asian currencies gained after the European Central Bank President Jean-Claude Trichet said Thursday, after the central bank raised interest rates, that it would waive minimum ratings requirements to accept Portuguese debt as collateral. 

Dealers said the move pushed concerns over European sovereign debt problems further to the back burner. With the threat of global financial market disruption appearing smaller, investors are growing more willing to bet on currencies that had suffered during the recent flare-up in concerns over Greece and other fiscally troubled European countries, they said. 

The Pound is under pressure this morning against most of its major counterparts after the BoE left interest rates on hold at the current historical lows. BoE Governor Mervyn King has been persistent in his tolerance of rising inflation as the British economy languishes.

The Australian dollar pushed towards its highest levels of the week Friday as an upbeat U.S. jobs report from payroll giant ADP lifted riskier currencies. The Australian dollar was further helped by news the European Central Bank will waive minimum ratings requirements to accept Portuguese debt as collateral. These developments, however, were equally detrimental to both ends of the Australian bond curve. At 0630 GMT, the Australian dollar was at USD1.0781, up from USD1.0735 late Thursday and up from USD1.0699 before a strong local jobs report in Australia on Thursday. Against the Japanese yen, the Australian dollar was at JPY87.64, up from JPY86.895.
Market expectation
Dealers said that if the non-farm payrolls report for June due at 1230 GMT underscores economic recovery that could boost the greenback further against the safe-haven yen even as it weighs on the U.S. unit against more risk-sensitive currencies such as the euro. 

The dollar could rise above its recent high of JPY81.77, and possibly top JPY82.00, if the payrolls report shows employers added more than the 125,000 jobs economists expect on average, said dealers.

At the same time, the boost to investors' willingness to bet on higher-yielding, riskier assets that a strong jobs report would bring means the euro could climb to USD1.4450, said dealers.

European stocks are expected to open higher Friday, after a round of better than expected labor data from the world's largest economy Thursday raised expectations for the all-important U.S. nonfarm payrolls release later.