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JPY, USD Climbs Higher in Thin Trading

Mon, Sep 1 2008, 21:28 GMT
by Korman Tam

Forexnews.com

9/1/2008 1:45 PM: EUR/$..1.4602 $/JPY..108.06 GBP/$..1.8008 $/CHF..1.1014 AUD/$..0.8497 $/CAD..1.0679

JPY, USD Climbs Higher in Thin Trading

The dollar is higher across the board, strengthening past the 1.80-level against the sterling and pushing the euro to 1.4583. Despite the holiday-shortened week, with the US market closed today in observance of the Labor Day holiday, foreign exchange traders will digest a barrage of economic events including several key central bank monetary policy announcements, including the Bank of Canada, the Reserve Bank of Australia, the European Central Bank and the Bank of England. Among the central banks, only the RBA is expected to shift policy – cutting its benchmark interest rate by 25-basis points to 7.0%. However, commentary from the BoC and ECB will be closely scrutinized for clues on whether policy changes from either central bank can be anticipated.

US economic reports due out this week consist of manufacturing ISM, durable goods orders, factory orders, weekly jobless claims, Q2 productivity, services ISM, and the August jobs report. Manufacturing ISM, due out on Tuesday at 10:00 AM, is seen slipping beneath the key 50-level to 49.9, which indicates contraction in the manufacturing sector for the month of August. Meanwhile, garnering the lion’s share of market attention this week will be Friday’s August jobs data. Although the unemployment rate is estimated to remain unchanged at 5.7%, the data is likely to indicate a loss of 73k jobs, greater than the 51k jobs lost from July.

 
Sterling Breaches Key Levels

The pound came under attack again, stumbling to an all-time low against the euro at 0.8136 and breaking beneath the 1.80-handle to its lowest level since April 2006. Prompting the latest sell-off were comments over the weekend from British Finance Minister Darling who said economic conditions in the UK were “arguably the worst in 60-years”. The sterling has remained under pressure in recent weeks given the deterioration in UK economic fundamentals and lingering inflationary pressure impeding the Bank of England’s ability to stimulate the economy with rate cuts.

The Bank of England deliberates this week on policy and is expected to leave rates unchanged on Thursday morning. As is customary, no statement is due out when the Bank leaves rates unchanged.

Yen Edges Higher

The yen advanced against its higher-yielding counterparts rallying to 194.20 against the sterling and 157.58 versus the euro. Amid heightened fears that the economies of the Eurozone and UK may be headed towards recession, traders pared back carry trades – ultimately benefiting the Japanese currency. Moreover, Japan’s PM Fukuda resigned early on Monday amid growing pressure from the LDP party.

USDJPY recovered above the 108-level with resistance seen at 108.40, followed by 108.70 and 109. On the downside, support starts at 107.60, backed by 107.30 and 107.

Published on  Mon, Sep 1 2008, 21:32 GMT