DJ Midday Forex: Dollar Mixed, Cross Flows Favor Euro
LONDON (Dow Jones)--The dollar is mixed against other major currencies midday Monday in Europe, with cross-related flows favoring the euro and trimming recent yen gains.
The euro is making steady progress above $1.27 in what traders describe as a cautious market, as Monday marks the fifth anniversary of the 9/11 terrorist attacks.
The yen slipped in Tokyo after Japanese July machinery orders fell an unexpectedly large 16.7%, against an expected decline of 5.3%. The Japanese unit weakened above Y149.00 by midday in Europe, up over 100 sen on the day, while dollar/yen climbed back above $117.00. Sterling came under pressure after subdued producer price index data eased inflation worries and chipped away at the pound's interest rate prop that has supported the unit of late.
U.K. August Output PPI was flat on the month against the Dow Jones Newswires forecast of a 0.2% increase, while input PPI fell 1.2% on the month, the largest monthly fall since December 2004.
Euro/sterling rose to a fresh three-week high of 0.6817 shortly after the data, while cable gave back early gains to trade around the day's lows of $1.8650.
However, despite the overall weaker start for the dollar many technical analysts are expecting the U.S. unit to strengthen in the sessions ahead, with the exception of dollar/yen.
BNP Paribas expects the latter to be kept under pressure as Asian currency flexibility is likely to be addressed as this weekend's Group of Seven meeting in Singapore. The bank has targets of Y114.05 for dollar/yen and Y147.30 for the euro/yen cross.
As for euro/dollar, the bank says the breach of trendline support at 1.2695 seen Friday favors the downside and it would sell upticks to $1.2730 with a stop at $1.2780, targeting $1.2570.
By 1000 GMT, the dollar was at Y117.23, up from Y116.93 late Friday in New York, according to EBS. The euro was at $1.2725, up from $1.2672, and at Y149.05, up from Y148.20. The dollar was trading at CHF1.2400 from CHF1.2475, while sterling was fetching $1.8665 versus $1.8652.
With no major U.S. data scheduled for release Monday, dealers are focusing on a news conference featuring European Central Bank President Jean Claude Trichet at the regular bi-monthly Group of 10 meeting, at around 1100 GMT.
The U.S. session offers speeches from Federal Reserve members Cathy Minehan (1200 GMT), Donald Kohn (1515 GMT) and William Poole (1630 GMT).
