Previous session overview

The U.S. dollar advanced against most major counterparts on Tuesday, with gains especially strong against the euro amid ongoing Greek debt worries and further signs that Germany's economic recovery may be losing momentum.

The dollar index (DXY) rose 0.4% to 77.456. The index tracks the dollar against a trade-weighted basket of major rivals. The dollar was up 0.4% versus the Japanese currency, trading at JPY91.03.

The U.S. currency also rose against its Canadian counterpart. The Bank of Canada on Tuesday warned that the Canadian dollar's "persistent strength" could act as "a significant further drag on growth." The BoC kept its target for its overnight rate at 0.25% and repeated its commitment to hold it there until the end of the second quarter, as expected.

One U.S. dollar traded at CAD1.0304, up 0.5%.

The euro traded at USD1.4296 versus the dollar, down 0.6%. Losses were extended after the Mannheim-based Center for European Economic Research, or ZEW, said its expectations index declined more than expected in January to 47.2 from 50.4.

The reading reinforces ideas that the modest pace of recovery seen by the euro zone's largest economy is losing steam, economists said.

On Tuesday, ratings agency Moody's said Greece's plan to cut its deficit from more than 12% of gross domestic product last year to below the E.U.'s 3% target by 2012 was relatively well designed for at least the short term. The Greek government's ability to implement the measures, however, remained a key uncertainty, the agency said.

Moody's kept a negative outlook on Greece.

Market expectation

The dollar is gaining as investors adjust their expectations for global economic growth, determining the U.S. is likely to continue to emerge from the widespread recession at a quicker clip than the euro zone, said analysts.

EURUSD ran to highs around USD1.4308 on the last push higher, some lift attributable to the bounce in euro-yen though flows in this pair described as modest. Stops above USD1.4305 cleaned out on the move and euro retreats to USD1.4285 after the damage is done.

USDJPY high print was JPY91.13 on the move higher, a couple of traders confirm, agreeing that stops were flushed atop JPY91.05 or so. Further stops said mixed in with offers to JPY91.20 before further stop interest appears.

GBPUSD squeezing up toward reported resistance at USD1.6380/85, as rate extends recovery off earlier pullback lows at USD1.6312. Move seen driven by euro-sterling as the cross breaks under earlier low at stg0.8730, extend to bring pressure to bear on reported stronger support at stg0.8725/20 (low stg0.87225). Rate currently trades around stg0.8725. A break of stg0.8720 may expose stg0.8700. For cable, above USD1.6385 may open a move toward USD1.6400 ahead of USD1.6420/25.

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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