Daily FX Market Outlook-11-11-2010 by AceTrader

Market Review – 10/11/2010 23:04 GMT

Dollar rallies to one-month high against yen on high U.S. Treasury yields

The greenback surged to one-month high against the Japanese yen on Wednesday as high U.S. Treasury yields prompted investors to reduce their bets against dollar.

The greenback edged higher from 81.55 against the Japanese yen after Tuesday’s rally from 80.54 to 81.98 and then surged in European morning. Dollar extended its rally after triggering stops above 82.00/10 and eventually climbed to 82.80 before retreating in NY afternoon on profit-taking. The greenback was supported as U.S. Treasury 10-year yields climbed to near seven-week high following a $16 billion sale of 30-year Treasury bonds.   
The single currency extended Tuesday’s selloff from 1.3974 to 1.3735 on concerns over sovereign-debt problems of some eurozone nations. Despite euro’s brief recovery to 1.3826, the pair retreated in European session and tanked to 1.3670 as eurozone debts woes continued to weigh on the single currency, the 10-year Irish/German Government bond spread widened to another lifetime high of 630 basis points. Euro then staged a recovery in NY afternoon.  
Although the British pound traded sideways in Asia following Tuesday’s selloff from 1.6183 to 1.5952, cable jumped in Europe after the release of BOE’s Quarterly Inflation Report. Despite the pretty neutral tone, traders interpreted BOE was not going to step up its Q.E program any time soon. Cable rallied after sharp retreat and climbed to 1.6137 in NY afternoon. Cross buying in sterling versus euro gave support to cable as eur/gbp tumbled from 0.8638 to 0.8525.  
European equities sank on Wednesday as FTSE-100, CAC-40 and DAX tumbled by 0.99%, 1.45% and 1.00% respectively.  
Economic data to be released on Thursday include:  
Japan Domestic CGPI, Machine orders, Australia Unemployment rate, Employment change and U.S. market is closed for holiday.