Previous Session Overview

European currencies were making a comeback against the dollar early Thursday in New York as rising global stock markets and a general improvement in risk appetite make the higher-yielders attractive again.

The euro hit a high of USD1.3300 overnight; it's highest in more than a week, and about 10 U.S. cents up from a more than two year low of USD1.2329 it had plunged to on Tuesday.

The greenback has been able to recover some of its losses, however, after a report Thursday morning on third quarter U.S. gross domestic product that showed the economy contracted. The 0.3% fall wasn't as bad as the 0.5% decline that economists expected.

The dollar is advancing against the yen Thu morning as risk sentiment begins to heal. The latest initial jobless claims were better than many economists had expected.

Thursday morning New York, the euro was at USD1.3032 from USD1.2934 late Wednesday, while the dollar was at JPY98.39 from JPY97.22. The euro was at JPY128.17 from JPY125.70. The U.K. pound was at USD1.6451 from USD1.6347 and the dollar was at CHF1.1328 from CHF1.1324 Wednesday.

Market Expectations

Slide to USD1.2960 area brings chatter of mixed names selling, some option-related ahead of the option expiry hour, but certainly no chatter of hefty volumes. On the day, some mention has been made of official name euro sales but at higher levels, and not in amounts that would be considered significant or of a signaling nature. Overnight lows at USD1.2943 in sight, not much order talk around but could there be risk of stops from frustrated longs, if they haven't already bailed?

USDCHF is expected to move lower, after a recent break below 1.1490. The trend is now neutral, would change to negative were the pair to fall below 1.1250.

While the reduction in risk aversion is hurting the dollar against most currencies, the greenback is rising against the yen. Investors tend to sell the low-yielding yen when risk sentiment improves so they can buy higher-yielding assets.

The dollar move since the data has weighed on cable, as it declines in line with euro-dollar. Traders note system accounts selling in both pairs. Cable tested the intraday bids at USD1.6450, said to extend to USD1.6425 with stops also mixed in. Below the market stronger interest and further stops tipped at USD1.6350.