The Japanese yen fell against majors today after the Japanese Prime minister Yukio Hatoyama quit the government to enhance his party's chances of winning in the coming month's elections. Speculations are in favor that the current finance minister Naoto Kan, who favors weakening the yen, will lead the government.
On the other hand, the dollar advanced slightly against a basket of six currencies as seen by the dollar index which rose to 86.90 from yesterday's closing at 86.49. The dollar index retreated on Tuesday from a high of 87.46, paring its earlier advance on improvement in U.S. construction spending and manufacturing.
Despite the worries persisting in markets, some traders are betting on higher-yielding currencies after their tremendous fall since the beginning of the year, especially as global economies are showing vivid recovery signs.
With regard to the euro-dollar pair, it is steady today in the absence of important fundamentals from the euro zone. The 16-nation currency is still traded near four-year low against the greenback after dropping nearly 8% against it last month. ECB policy maker Noyer said the euro's exchange rate at around a 10-year average is by no means an unusually low level. However, it seems that the euro zone is building its recovery on the euro's depreciation through boosting exports. Currently, the pair is trading at 1.2227, recording a high of 1.2273 and a low of 1.2183. For the rest of the day, the pair is predicted to move between support and resistance at 1.2175 and 1.2280 respectively.
As for the sterling-dollar pair, it is showing incline for the third day on the daily charts, leaving sideway movements seen over the past two weeks where the pair has been hovering around 1.4334 level. This week, data released witnessed further expansion in manufacturing and construction in addition to other upbeat data which is providing a strong clue the economy is on the right track towards recovery. Also, Prudential said today it will not accomplish the $35.5 billion deal to buy American International Group's Asian life insurance unit which gave support to the sterling. Meanwhile, the pair is trading around 1.4685, after reaching a high of 1.4769 and a low of 1.4627, while it is expected to move between support at 1.4635 and resistance at 1.4730.
Relative to the dollar-yen pair, it surged to 91.85 after the breach of strong resistance at 91.65. Political instability ahead of Parliamentary elections next month affected Asian shares and eroded the appeal of the yen. Earlier today, the pair hit a high of 92.04 and a low of 90.87, whereas support is seen at 90.70while resistance is at 92.30.