Previous session overview

The dollar and the euro rose against the yen in Asia on Wednesday on buying by Japanese pension funds, as rising commodity prices and recent strong U.S. data encouraged purchases of higher-risk currencies.

Early in the day, the euro dropped to two-week low at JPY131.27 in reaction to Fitch Ratings' downgrade of Iceland's credit ratings. But the decline provided an opportunity for Japanese pension funds and trust banks to buy the European currency on dips, traders said.

That left the euro slightly higher against the yen compared with levels late in New York, at JPY132.11 compared with JPY131.79. But the European currency remained slightly lower against the dollar, at USD1.4359 from USD1.4370. The dollar was higher at JPY92.00 compared with JPY91.72.

The market shrugged off local media reports that Japanese Finance Minister Hirohisa Fujii would likely soon step down due to ill health, as Japan's policy on the yen isn't likely to change much even if someone new becomes finance chief, traders said.

The Pound fell aggressively as the market focused on the UK debt outlook in 2010 and possibility of rating downgrades. EURGBP traded briefly above 0.9000. On the Cable the USD1.6000 provided some minor support but the bounce was limited and the pair remained under pressure.

The Australian dollar was stronger against both the U.S. dollar and Japanese yen late Wednesday after grinding higher off early morning lows. Strong building sector data gave the currency a lift as the focus fixed on crucial U.S. employment data due Friday.

Market expectation

Traders said the market's outlook going forward would likely depend on how good the U.S. December jobs data from payroll giant Automatic Data Processing are. The data are due out later in the day.

If the numbers are better than expected and push up long-term U.S. Treasury yields, the dollar could break above the next resistance level of JPY92.20 and the euro above JPY132.30, traders said.

For EURUSD support now seen placed at USD1.4290, with interest extending to USD1.4280, a break may expose stronger support area between USD1.4260/50. Resistance seen placed at USD1.4310/20, more between USD1.4335/40.

For Pound resistance seen placed toward USD1.6010 (USD1.6008 50% USD1.6070/1.5945), a break to open a move toward USD1.6020/25 ahead of USD1.6040/50. Support USD1.5950/40.

Ongoing speculation over Japanese Finance Minister's future weighing on the yen, with accompanying fresh general demand for the dollar taking the rate up to highs of JPY92.18. Exporter offers reported at JPY92.20, more toward JPY92.50. Support JPY91.55/50, JPY91.25/20.

European stocks are expected to open a little lower Wednesday, as market participants pause for breath and look ahead towards key employment data out of the U.S. while the single currency dips on continuing concerns over Greece.

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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