• Home ::
• Fundamental ::
• Analysis Reports ::
• Asia Market Update

• Send
• Print
• Add To
• Rss

Asia Market Update

052c1b88-c518-44b9-acae-97fcdd51965d

0

0

Asian central banks intervene after Thailand declares State of Emergency

Tue, Sep 2 2008, 03:56 GMT
by Eben Esterhuizen

TradeTheNews.com

- Asian currencies came under the spotlight today, with traders saying that central banks in Thailand, Malaysia, and Indonesia all intervened to defend their currencies. Mounting fears that foreign investors may repatriate investments continue to weigh on Asian currencies, complicating monetary policy in a region struggling with inflation. The size of the intervention wasn't large, with central bankers merely trying to buy time as the market reassesses the fundamentals of the greenback rally that started in August. In Thailand, a State of Emergency was declared in Bangkok after long-running anti-government protests and violent clashes overnight, forcing authorities to support the local currency. In South Korea, authorities continue to try and talk up the sliding KRW, with traders estimating that South Korean authorities sold $7.0B to support the KRW during August. Moody's said that Korea isn't at risk of another currency crisis, but added that short-term debt poses "some vulnerability". Korean authorities remain concerned over a possible liquidity problem in September when 8.6 trillion won (about $7.9B) in bonds held by foreigners mature, and repatriation flows might knock down the KRW.

- Forex: The greenback continued to strengthen in Asia, with the USD index trading at a new 2008 high around 77.80. The U.S. currency might be in for some stiff resistance over the coming 24hrs, with the USD index about to test the December 2007 trend high at 77.85. Geopolitical tensions between the E.U. and Russia weighed on European currencies, with U.S. Vice President Dick Cheney announcing that he will travel to Georgia and Ukraine this week. Pundits say Cheney's trip could help lay the groundwork for stiffer Western responses to last month's Russian incursion of Georgia. EUR/USD hovered close to last week's low at 1.4565/70, a key support level, with stops seen below 1.4560. A break below these levels will target the March 2006 trend low around 1.4555. USD/JPY had a choppy session, managing to break above the London high at 108.39 and triggering some light stops. The pair failed to test yesterday's Asian high at 108.70, with more offers seen ahead of 108.75. NZD/USD traded lower for most of the session, finding support around 0.6920. The New Zealand Institute of Economic Research said the economy will emerge from recession in Q4, but faces strong inflation pressures and only a gradual easing in central bank interest rates over the next year.

- AUD/USD under pressure ahead the Reserve Bank of Australia rate decision at 0:30 EDT: An interest rate cut of 25bps is fully priced by the market, and has been confirmed by several RBA sources in the Australian press. The AUD is looking heavy ahead of the announcement, but some analysts argue that the RBA's accompanying statement may be less dovish than the market currently expects. The market currently expects about three cuts this year, but recent data highlighting profit growth and business investment intentions have questioned the market's outlook. From a technical perspective, the AUD/USD close below 0.8500 is a bearish development, and the pair has since dipped below 0.8475, a 12mnth low. Chartists add that there isn't any technical support until weekly low around 0.8275.

- Traders continue to dump the GBP, with GBP/USD trading as low as 1.7860 in Asia. Chartists suggest that GBP/USD is in for more pain, pointing out that there isn't any decent support until the 50% retracement of the 1.3682/2.1162 move at 1.7420. According to reports, British Prime Minister Gordon Brown will unveil plans on Tuesday to support the U.K.'s slumping housing market, but the news failed to halt the currency's downturn.

- Japanese investors were surprised by news of Prime Minister Fukuda's resignation, but the impact of the announcement appears limited for now. Japanese bond markets struggled to make sense of it all, with choppy trading seen across the curve. Ruling Liberal Democratic Party Secretary-General Taro Aso is expected to fill the vacant position at an upcoming election, but it is quite likely that it will only be an interim government with few implications for investors. The big question remains what foreign investors will think of the latest developments, especially when considering that Aso is the type of politician who tends to boost government spending.

- Equities: At 23:45 EDT Japan's Nikkei is +0.46%, the S&P/ASX200 is +0.85%, South Korea's KOSPI is +0.03%, Hong Kong's Hang Seng index is flat, and the Shanghai composite index is -0.71%. The S&P500 futures contract is currently trading at 1,284.30. Tokyo shares rebounded after Fukuda's surprise resignation, with bargain hunters doing their best to put a positive spin on Japan's political instability. But trading volume remained light in Tokyo, with investors waiting for reaction from foreign investors. Aussie stocks traded higher ahead of the RBA rate decision at 0:30 EDT, with rate-sensitive stocks leading most of the upside. Upside was capped by resource stocks, with oil failing to rebound from earlier selling. In South Korea, an early rally quickly fizzled, as investors continue to worry about the KRW weakness.   

- Commodities: With Gustav downgraded to a tropical storm, Nymex crude oil is trading lower at $111.19/bbl. Spot gold was dragged down by continued USD strength and falling oil prices, last trading at $820.30/oz. Chartists say a break below $815/oz would go on to test $800/oz.

Published on  Tue, Sep 2 2008, 03:58 GMT