Monday, January 31, 2011

Forex | Afternoon Overview | 31 January 2011

Forex | Afternoon Overview | 31 January 2011

Previous session overview

The dollar was weaker in early US dealings, modestly supported by Egypt-related risk aversion but surrendering Friday's gains against the euro. Euro-zone inflation data is helping the single currency by heightening fears of an ECB rate hike, analysts said. However, concerns about Europe's debt crisis are constraining the euro's gains. A data-heavy week, which includes US payrolls data, increases the possibility of more sharp moves. EURUSD trades higher around USD1.3703 from USD1.3612 late Friday, with USDJPY flat around JPY82.16. Meanwhile, EURJPY trades around JPY112.57 from JPY111.77.

The Pound was trading at USD1.5873 against the dollar, compared with USD1.5864 late Friday in New York.

The ICE Dollar Index, which tracks the U.S. dollar against a trade-weighted basket of currencies, was at 78.057 from 78.156 Friday.

CAD gained vs USD, hitting session highs after domestic and US data. Canadian GDP for Nov narrowly beat expectations, with a 0.4% rise. In the US, consumer spending topped expectations, and the ISM-New York business index hit and 8-month high. USDCAD was at CAD0.9966, down from CAD1.0005 late Friday.

European stock markets have remained weak Monday, with ongoing political tension in the Middle East and North Africa the dominant theme. However, the markets have recovered to a degree from the sharp early losses, with some investors tempted in at the lower levels.

Market expectation

The euro could keep sliding in the next week if political troubles in Egypt spark a broader scramble by investors out of risky investments and into safer bets including the dollar and Swiss franc. Investors scrambled out of assets perceived to be riskier such as stocks and the single European currency on a wave of risk aversion sparked by growing unrest in Egypt, market analysts said.

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