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    Asian Session – Euro and pound under pressure but dollar regains momentum

    The dollar moved higher on Friday to put it on track for a weekly gain against a basket of currencies as increased risk aversion weighed on other majors in Asian trading today. The greenback was also boosted from stronger-than-expected weekly jobless claims yesterday, which put the prospect of a Fed rate rise in July back on the agenda, though a June hike is now seen as firmly off the table.

    The dollar index was up 0.2% at 94.15, having recovered from a one-month low of 93.43 on Wednesday. Against the yen, it climbed to 107.25 at the start of Asian trading before easing just below the 107 level in late session.

    The yen was down against most currencies on Friday despite the risk off mood as traders turned cautious ahead of next Thursday’s policy meeting by the Bank of Japan.

    The euro was trading not far off from yesterday’s three-year low of 120.32 yen and was also down sharply against the dollar. The single currency tumbled from a peak of 1.1415 dollars yesterday to a one-week low of 1.1289 dollars in today’s Asian session. Worries over Brexit and dovish remarks from ECB President Mario Draghi on Thursday weighed on the euro but found some support from German and French data.

    German annual inflation was confirmed at 0.1% in May according to the final reading. Meanwhile, French industrial output rose by more-than-expected in April, and was up 1.2% month-on-month versus forecasts of 0.4%.

    Sterling extended its slide against the dollar to a third day despite very strong manufacturing and trade figures in recent days. The implied volatility for one-month pound options versus the dollar jumped to the highest since 2009 as investors grew increasingly concerned about the risks of a Brexit as recent polls have been pointing to a tight race with only two weeks to go to the referendum.

    The pound was down at 1.4416 dollars, while the euro rose to 0.7850 pounds.

    The stronger dollar weighed on commodities on Friday as crude oil prices fell back from yesterday’s fresh yearly highs. US oil futures were last down 1% at $50 a barrel.

    Gold prices were firmer though due to the risk-off sentiment and look set to end the week with a 2% gain. They were last up at $1268.86 an ounce.

    The broader uncertainty in the market as a result of the upcoming FOMC and Bank of Japan meetings as well as the Brexit vote put equities under pressure but boosted government bonds.

    The Swiss franc also benefited from the flight to safety and has gained over 1% against the dollar and the euro in the past week. The dollar slid to 0.9619 francs and the euro to 1.0890 francs in late Asian trading.

    Coming up later today, there is no major data expected out of the European session, but Canadian employment figures and the University of Michigan confidence index will dominate the US session.

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