FX Daily Report

The dollar slumped to a one-year low against a currency basket on Wednesday as risk appetite increased and a report showing sharply higher net capital outflows from the U.S. in July rattled investors.

The euro rallied to a nine-month high, a move analysts said was an extension of ongoing negative sentiment on the U.S. currency, whose attractiveness as a safe-haven has diminished on the view the global economy is improving. That has helped bolster most higher yielding currencies.

The yen rallied to a seven-month high against the beleaguered dollar after Japan's incoming finance minister said a strong yen had advantages for the nation's economy. He was opposed to currency intervention if movements were gradual, while adding that current moves were not rapid.

Sterling pared early losses as the dollar weakened broadly on Wednesday, but the pound remained vulnerable in the wake of dovish comments by the UK central bank the previous day. Data on the UK labor market on Wednesday were broadly in line with expectations but provided some respite for the pound as the figures were not as bad as some had feared.

Investor morale in Switzerland improved sharply in September, a record rise in the country's ZEW investor sentiment indicator showed on Wednesday, adding to recent signs the economy is moving out of recession. The Swiss ZEW indicator jumped nearly 40 points in September to 58.0, said Credit Suisse, which issues the indicator in cooperation with the German ZEW economic research institute.

Switzerland slipped into its worst recession in over 30 years at the middle of last year as demand for its exports collapsed due to the global economic slump.

The SNB will review its course today. Economists expect the SNB to keep its interest rate target at 0.25 percent and to continue to fight a rise in the Swiss franc with interventions.

Falling energy prices kept euro zone inflation in negative territory in August, data showed on Wednesday, in what is likely to keep European Central Bank interest rates steady despite a nascent economic recovery.

EUR/USD: The pair reached 1.4736 high yesterday. On daily chart still in overbought territory (RSI over 70). Despite bearish USD sentiment do not want to go long from these levels. Prefer sell at current 1.4726 price and moving up till 1.4740 for target 1.4620 with stop loss above 1.4770

GBP/USD: The pair fights with resistance at 1.6500 currently. Prefer sell at current level and moving up till yesterday's high 1.6530 for target 1.6380. Stop loss above 1.6580.