Previous session overview

The dollar fell to an eight-month low against the yen in Asia Friday as dovish comments by a Federal Reserve official overnight made investors speculate upcoming U.S. economic indicators will come in weak.

St. Louis Federal Reserve President James Bullard said in a research paper that the U.S. is closer to a Japanese-style (deflation) today than any time in recent history, adding that buying more Treasurys would be an option to stave off the threat.

The comments fueled recently prevailing views that the world's largest economy is losing its growth momentum at a faster pace than analysts had expected.

As of 0450 GMT, the U.S. unit was at JPY86.34, lower than JPY86.96 in New York Thursday. Weak Japanese share prices were another reason behind the dollar's brief decline to JPY86.25, its lowest since December last year.

The euro was also weaker against the yen at JPY112.85 from JPY113.77 in New York overnight.

Against the dollar, meanwhile, the euro was at USD1.3070, lower than USD1.3090 in New York Thursday. The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 81.574 from 81.599.

Sterling, now a shade firmer against the dollar and euro, is likely to consolidate against those currencies pending the U.S. GDP data later.

The Australian dollar nudged higher in Asia Friday, helped by month-end demand linked to fund managers adjusting currency hedges, while the focus again returns to the U.S. economy.

Market expectation

Dealers will pay attention to U.S. economic data to be released in the coming weeks as their results will likely turn out to be weak and so support the market speculation, said analysts.

The University of Michigan will release a monthly consumer sentiment survey at 1355 GMT Friday. Economists expect the headline index will deteriorate to 67.2 in July from 76.0 in June.

If the data miss the consensus, U.S. share prices and Treasury yields will decline, which would push the greenback down to as low as JPY85.00, said traders.

For the currency, analysts said businesses expect the Australian dollar to trend higher towards USD0.9200 by the end of 2010, before easing to USD0.8200 in mid 2011.

European stock markets are expected to open lower Friday, with declines on Wall Street and in Asian markets overnight adding weight to worries about the endurance of the U.S. economic recovery.

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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