Dollar ends mixed in subdued New York session: Oct 8, 2015

Market Review - 07/10/2015 22:35GMT 
 
Dollar ends mixed in subdued New York session

The greenback moved in different directions versus the other major currencies in subdued trade on Wednesday as investors confused on the timing for Federal Reserve to raise interest rates after recent poor U.S. economic figures.

Versus the Japanese yen, dollar came under renewed selling pressure after a brief rise to 120.36 in Asia and then tanked to 119.77 after the Bank of Japan refrained from expanding its stimulus program on Wednesday. Later, the pair edged higher to 120.18 in European midday but only to fall to a fresh session low of 119.75 in New York morning due to renewed broad-based buying in yen.

On Wednesday, Bank of Japan kept its monetary policy steady, pledged to increase monetary base at annual pace of 8- trillion yen. In the follow statement, BoJ said 'decision was made by 8-1 vote; BoJ board member Kiuchi proposed tapering annual JGB purchases to 45 trillion yen, which was turned down by majority vote; Kiuchi proposed keeping asset buying, 0 rates for as long as needed under flexible price target, which was turned down by 8-1 vote.' The central bank also said 'business sentiment has stayed at favorable level but some cautious developments have been observed in some areas.'

In European morning, BoJ's governor Kuroda said in his press conference, 'Japan's economy continues to recovery moderately although exports, production have been affected by slowdown in emerging markets; expect industrial production to be flat for a while, then pick up as weak yen helps exports; inflation expectations appear to be rising on the whole from long-term perspective; Japan economy to continue moderate recovery; expect CPI to reach 2% around first half of fiscal 2016/17 but may change depending on oil prices; BoJ will examine both upside, downside risks to economy n prices, n adjust policy as appropriate; supply-demand balance in economy is steadily improving centering on labour market; will thoroughly debate price trend at Oct 30 meeting when updating forecasts; strongly expect government to take steps to ensure economic growth accelerates; no change in our stance to steadily implement QQE to achieve 2% inflation at earliest possible time in line with joint statement with government.'

The single currency ratcheted lower against the greenback after a brief rise above previous session high of 1.1280 to 1.1284 in Asia on Wednesday and price fell to 1.12122 in European morning after data showed German industrial output posted its steepest drop in a year in August, suggesting Europe's largest economy may be losing momentum just as an emissions scandal at Volkswagen. Later, although the pair recovered to 1.1274 at New York open, renewed broad-based selling in euro knocked price down to a fresh session low of 1.1212 in New York morning before staging another bounce to 1.1266.

The economics ministry said that German industrial output fell 1.2% in August, from 1.2% in the preceding month whose figure was revised up from 0.7%. Year-over-year, German industrial output rose 2.3% in August, from previous reading of 0.8%.

The British pound rallied versus U.S. dollar on Wednesday on market chatter of M & A deal and upbeat U.K. data. Cable found support at 1.5221 ahead of Asian open and then rose to 1.5312 in European morning, then further to 1.5340 in New York morning before easing.

Reuters reported, official data showed that the British manufacturing output picked up in August after falling sharply in July as auto plants came back online after summer shutdowns, however, compared with August last year, manufacturing output was down 0.8%, something that will be noticed by the BoE which is expected to say on Thursday that it is keeping interest rates at a record low.

Meanwhile, UK manufacturing rose by a monthly 0.5%, above economists' average forecast of a 0.3% rise. It had plunged by 0.7% in Jul, when output was hit by earlier than usual summer shutdowns of car plants. Britain's factory sector has lagged the broader recovery in the economy since the financial crisis and it has struggled more recently in the face of slower demand in key export markets and after a strengthening of sterling.

AB InBev said earlier Wednesday that it had proposed a cash price of 42.15 pounds a share, with a so-called partial-share alternative aimed at pleasing SABMiller's largest shareholders. The latest proposal was the third it has made to SABMiller's board, which rejected the earlier two, both companies said. Having said that, The WSJ reported later in the day that SABMiller has rejected a sweetened takeover proposal valued as high as 68.24 billion pounds from Anheuser-Busch InBev, saying the proposal "still very substantially undervalues" the world's second-largest brewer.

Data to be released on Thursday:

Japan machinery orders, current account, consumer confidence, machine tool orders, Australia HIA new home sales, Switzerland unemployment rate, Germany trade reports, UK RICS housing price, BoE rate decision, QE total, MPC vote outcome, monetary policy statement, BoE meeting minutes, ECB meeting minutes, Canada housing starts, new housing price, and FOMC meeting minutes.