Previous session overview

The dollar rose to its highest rate in almost two weeks against the yen early Friday in New York after the Bank of Japan renewed its pledge to fight deflation.

Pressure on the yen began to build overnight when the Japanese central bank kept its key interest rates unchanged at 0.10%, but said it won't tolerate deflation, or the persistent decline in consumer prices. As New York trading got underway, the dollar hit fresh intraday highs against the Japanese currency.

For most part of 2009, near zero interest rates in the U.S, prompted investors to use cheap dollars, rather then the yen, to fund those purchases. That has shifted recently: better economic data means the Federal Reserve is now expected to withdraw liquidity and eventually tighten rates during 2010, while Japan's economy could still struggle enough to force the Bank of Japan to keep rates low.

The Dollar Index, which tracks the U.S. currency against a trade-weighted basket of six currencies, was at 77.780 from 76.900.

The Swiss franc was in focus Friday, as its gains against the dollar and the euro sparked talk of intervention by the Swiss National Bank. Rumors of a coup in Pakistan, later denied by a spokesperson for Pakistani President Asif Ali Zardari, earlier sent the euro below the key level of CHF1.50.

Market expectation

EURUSD continues to respect the overnight low area ahead of USD1.4300 with a bounce from earlier lows at USD1.4315 stretching to USD1.4350 amid muted flows, putting the pair back in the middle of a broad overnight range. Offers remain at a distant USD1.4420.

Pound demand toward USD1.6150 and offers positioned ahead of USD1.6200 currently seen keeping the rate contained. Rate trades around USD1.6180.

USDJPY gains stretch to JPY90.60 area now as the dollar gains fresh lift across the board as European and UK traders eye the exits ahead of the weekend and a holiday shortened week next week. Dollar offers erased on the bounce, the pair eyeing tech resistance around JPY90.70, Ichimoku cloud top, with stops a risk above.

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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