Previous session overview

The dollar fell against the yen in Asia on Tuesday as investors speculate the Federal Reserve won't hike its key policy rate for the time being, despite recent upbeat economic indicators.

Asian hedge funds sold the greenback due to the 0.016 percentage-point drop in the 10-year U.S. Treasury yield overnight to 3.827%, Tokyo dealers said. The note has recently been currency dealers' main focus in making their bets.

The yield dropped even though recent economic data show the U.S. economic recovery gaining momentum, as Fed governor Elizabeth Duke suggested the central bank will keep its interest rate low for some months. She said she anticipates the subdued trend in inflation to continue.

As of 0450 GMT, the U.S. currency had fallen to JPY91.68 from JPY92.59 in New York. The Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 77.308 from 77.512.

The euro rose to USD1.4418 from USD1.4412 but fell to JPY132.19 from JPY133.42. Dealers said the yen is being favored as lingering concerns over European credit make investors unwilling to actively buy the euro.

The British cable initially fell to intra-day low of USD1.6060 at European opening but price quickly rebounded from there and then rallied to intra-day high of USD1.6242. However, cable was unable to hold on to its gain and was dragged lower by active cross-selling in sterling (EURGBP rose from 0.8854 to 0.8967), price later dropped to around USD1.6085.

The Australian dollar was higher against both the U.S. dollar and yen Tuesday, bolstered by strong overnight buying as gains in metals prices and a surge on Wall Street spurred fresh appetite for risk.

Market expectation

For this reason, U.S. non-farm payrolls data due Friday remain the biggest event of this week. But it is important to pay attention to the bond market's reaction to the data, instead of just the data themselves.

Employment data for December may show the number of jobs unchanged from the previous month, putting an end to 23 consecutive months of declines.

For Pound offers remains around USD1.6154 a break to open a move on toward USD1.6175 (61.8%) ahead of USD1.6200 (76.4%). Support noted from USD1.6120 with interest extending toward USD1.6100. A break here may allow for a deeper move toward USD1.6085/80 ahead of stronger interest at USD1.6065/60.

For EUR resistance seen at USD1.4480/85 ahead of USD1.4500/05 with stops positioned on a break of USD1.4510. Stronger offers noted at USD1.4530/35. Support USD1.4410/00.

Traders expects the Australian dollar to trade narrowly ahead of the payrolls data with investors extra cautious as thin market volumes present the risk of unusual volatility if payrolls surprise.

Caution ahead of the release of Australian retail sales data for November on Thursday can also be expected, traders said.

Disclaimer: the data made available by Dukascopy (Suisse) SAis for informational purposes only. Publication of this data by Dukascopy (Suisse) SA does not constitute provision of investment advice and Dukascopy (Suisse) SA assumes no responsibility with regard toany information, forecast or recommendation herein contained and assumes no responsibility with regard toany losses resulting from any activities conducted the basis of this data, including any investment decisions.

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