Friday, February 4, 2011

Forex | Morning Overview | Non-Farm Payrolls | 4 February 2011

Forex | Morning Overview | Non-Farm Payrolls | 4 February 2011

Previous session overview

The dollar edged down against the yen in Asia Friday as Japanese exporters sold the U.S. currency for regular settlements, and as some short-term investors trimmed bets on the unit ahead of a key monthly U.S. jobs report.

Comments from Minneapolis Federal Reserve President Narayana Kocherlakota, reported in morning trade in Tokyo, added to the view that the central bank won't tighten monetary policy anytime soon.

At 0450 GMT, the dollar was down at JPY81.58 from JPY81.62 late Thursday in New York. The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies including the yen, was at 77.763 from 77.772.

The Australian dollar, meanwhile, rose to one-month highs against the dollar and the yen after the Reserve Bank of Australia signaled that catastrophic floods in December and January hadn't damped its otherwise buoyant outlook for the commodity-rich Australian economy.

The central bank's statement sent the Australian currency to USD1.0196, its highest since Jan. 3. Against the yen, it rose to JPY83.19, its highest since Jan. 6. At 0450 GMT, it was at USD1.0184 from USD1.0146 late Thursday in New York, and at JPY83.09 from JPY82.83.

Elsewhere, the euro was at USD1.3632 at 0450 GMT from USD1.3633 late Thursday in New York. Against the yen, the common currency was at JPY111.22 from JPY111.28.

The Pound is also lower this morning on broad USD strength, but its drop has been far more moderate than that of its mainland European counterpart. Strong economic data out of the UK has provided support for the GBP with PMI Services beating expectations of 51.3, registering an impressive 54.5. With all three components of PMI (manufacturing, construction, and services) showing strong signs of expansion, investors have begun to give credence to the growing faction of BoE members calling for a hike in interest rates.

Market expectation

If the non-farm payrolls data for January due at 1330 GMT come in weaker than expected as the December report did last month the greenback could fall below the JPY81 mark, analysts and dealers said.

Dealers said attention is now squarely on the U.S. payrolls. Any worse-than-expected result will likely exert a bigger impact than if the reading exceeds expectations, they said. The forecast for the report to show 136,000 jobs added in January, up from 103,000 added in December.

The USDCHF has breached its technical resistance at 0.9486 exposing upside potential to the 20-day moving average of 0.9551, according to technical analysts. The pair has reversed just ahead of the low 0.9300 area, and this is encouraging. It has eroded the 0.9486 resistance and look for gains to 0.9551, and then the 55-day moving average at 0.9651, analysts note.

European stocks are expected to open higher Friday, after a firm close on Wall Street, with sentiment positive ahead of the U.S. employment report. Read more