Monday, August 15, 2011

Market Morning Overview - August 15, 2011

Previous session overview
The euro rose against the dollar and the yen Monday in Asia as firm regional share prices prompted investors to buy the risk-sensitive high-yielding currency. 

Market participants took a cue from Japan's benchmark Nikkei 225 Stock Average, which was up 1.24% as of 0450 GMT. 

The euro-buying wasn't that aggressive, but the impact of these orders was magnified due to Tokyo's thin trading volume, traders said. Many Japanese investors take summer leave around this time of the year, a period called obon. 

As of 0450 GMT, the euro was at JPY109.79 from JPY109.32 on Friday in New York and was at USD1.4294 from USD1.4250 last week.

The dollar, meanwhile, was at JPY76.81 from JPY76.72. The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at 74.463 from 74.565.

The Pound rallied to USD1.6300 in Europe before going to sleep for the rest of the day in a 20 pip range. The market was supported on strong European stocks which rallied after a short ban was put in place on banking stocks to stop manipulation from rumors rife in the current environment.

The Aussie did well rebounding back to the USD1.0350 resistance tracking stocks in the US and finishing the week on a positive footing after a rollercoaster ride. The risk sensitive currency is taking its cues from the Global stock market with the potential for large moves providing good trading opportunities.
Market expectation
Analysts say the euro's outlook is skewed downward despite recent resilience, as economic and financial conditions in the euro-zone continue to deteriorate at a faster pace than expected. Meanwhile, the perceived lack of leadership in confronting the sovereign debt crisis is creating widespread market anxiety.

Dealers said the dollar still faces the risk of a decline toward JPY75.00, well below its post-war record of JPY76.25.

Looking ahead, the dealer said the euro may rise further if the Swiss National Bank takes further steps to weaken the Swiss franc.

European stocks are seen opening higher Monday, with investors taking their cues from stronger sessions in Asia Monday and the U.S. Friday on the back of some positive economic data.

The outlook this week will be closely linked to the stocks markets which have opened well supported on Monday.