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The U.S. dollar rose against the yen and euro in Asia Monday
Written by article default Monday, 21 June 2010 08:58
Market OverviewThe U.S. dollar rose against the yen and euro in Asia Monday reversing an early session decline-after the People's Bank of China unexpectedly set its Yuan parity unchanged from Friday.
The decision by the PBOC to again set its dollar/Yuan central parity at 6.8275 was taken as a sign Beijing wants to temper expectations for sharp Yuan gains in the near future, despite its announcement over the weekend indicating it would allow the Yuan to start rising again.
The greenback rose to YEN90.97 after the PBOC's Yuan parity announcement, from YEN90.54 earlier in the Asian morning, while the euro fell to USD1.2368 from USD1.2430; against the yen, the euro was at JPY112.85 from YEN1112.26 Friday.
The PBOC's weekend announcement on currency policy had fostered initial expectations in Asian trade for Yuan gains, pushing the yen earlier to a three-week high against the dollar, as the Japanese unit is often used as a proxy for the tightly-regulated Yuan. Knock-on effects pushed the euro to a four-week high against the greenback.
The dollar fell as far as YEN89.95, while the euro rose to USD1.2490.
The Pound was not immune to quiet trading into the weekend with a rally in Europe sold back to support under USD1.4800. UK Public Debt borrowing was 16bn in May, slightly less than 18.2bn forecast. Preliminary Mortgage Approvals came in near expectations at 51k vs. 48k previously.
The Australian dollar rose to its highest level since mid May in Asia on Monday and bonds sold off after China's decision to allow greater flexibility in its exchange rate.
Market expectation
Several traders in Tokyo said the dollar may yet hit YEN91.50, noting several automated stop-loss buying orders were lined up at YEN91.00.
After last week's selloff, the dollar is expected to lose further ground against the Swiss franc, say traders. Losses may extend to 1.0930/00, they say, noting this level was the February high. At this level though, the market is expected to stabilize and may recover from there.
Analysts said China's statement Saturday that it will allow greater flexibility in its exchange rate move shouldn't be overstated, and will likely only result in modest Yuan gains.
European stocks are expected to start with broad gains, along with several other asset classes, after China's announcement over the weekend that it's increasing the flexibility of its exchange-rate regime ahead of the G20 summit in Toronto, Canada.