Previous session overview

The euro rose to a seven-week high against the yen in Asia Monday as hedge funds in the region bought the common currency, feeling relieved that results of stress tests of European banks did not bring any big surprises.

This buying pushed the euro to a high of JPY113.49 in morning trade in Tokyo. The common currency had not been that high since marking JPY114.16 on June 3.

Also helping the euro were gains in many of Asia's bourses, which prompted U.S. and other short-term investors to buy the risk-sensitive currency, dealers said. Leading the rises, Japan's benchmark Nikkei Stock Average was up 0.8% in early afternoon trade.

Also likely to limit any further gains in the common currency against the yen were selling orders from Japanese exporters around JPY113.50, dealers said.

Elsewhere, the dollar traded hands at JPY87.63, up from JPY87.45 late Friday in New York. Economists expect the report to show sales rose 3.7% on month after falling 32.7% in May.

The euro stood at USD1.2925 compared with USD1.2918. The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies including the euro, was at 82.471 from 82.475.

The British pound's strength was showcased yet again as it climbed over 1% vs. the USD on the day, boosted by data showing Britain's economy grew almost twice as fast as expected in Q2. Data showed gross domestic product jumped 1.1% on the quarter, the strongest growth in four years and almost twice as fast as forecasts for 0.6%.

The Australian dollar was higher late Monday, albeit below its day's peak as news that producer price inflation was lower than expected in the second quarter damped speculation of a near-term interest rate hike.

Market expectation

The U.S. unit could rise further if U.S. new residential sales for June, due at 1400 GMT, come in stronger-than-expected, dealers said.

The stress test results, which were largely as expected, dispelled short-term concerns. Still, many investors believe the test standards may have been too lenient, a view that could weigh on the euro in the months ahead, dealers said.

EURJPY down as short-term players sell to book profits; view that bids from Japanese exporters to limit gains above JPY113.50, near cross's earlier high at JPY113.49, highest in seven weeks, likely prompting speculators to lock in gains now, says traders. Traders expect EURJPY to hover in relatively narrow band for rest of global day, while tips a slight upward bias in JPY110.00-JPY115.00 band for week.

European stock markets are expected to open a touch higher Monday, as market participants react with relief to Friday's release of European bank stress tests. However, these gains could be limited amid a degree of skepticism over the rigor of the tests.

Disclaimer: the data made available by Dukascopy Bank SA is for informational purposes only. Publication of this data by Dukascopy Bank SA does not constitute provision of investment advice and Dukascopy Bank 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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