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The US dollar wandered in tight ranges with an eye on commodities

Tue, Aug 19 2008, 06:38 GMT
by Westpac Institutional Bank Team

Westpac Institutional Bank

News and views

The US dollar wandered in tight ranges with an eye on commodities, overall pressing a little higher late in New York for modest gains. These came despite a poor start to the week on Wall Street, where the Dow Jones traded down about -200pts late, weighed by the governmentsponsored mortgage agencies and other financials. Fannie Mae and Freddie Mac both sank more than 18% to fresh lows after Barron’s claimed shareholders would be wiped out if Treasury was forced to bail out the GSEs. Oil prices were more helpful to the USD, with NYMEX losing about $2 from its test above $115/bbl.

The New Zealand dollar was little changed overall, trading to a 0.7162 high in London but fading to the 0.7100 area during NY trade.

AUD/USD mostly bumped around 0.8700-40 but as US equity losses picked up steam in the NY afternoon, slipped below 0.8680.

EUR/USD chopped around mostly from 1.4690 to 1.4750, heading to the NY close below 1.4700.

USD/JPY traded tight ranges, again meeting sellers in the mid-110s (including US names selling EUR/JPY), easing back to the figure.

US NAHB homebuilders’ activity survey unchanged at 16 in Aug.
That is still the equal low point in the multi-decade history of this series.

Euroland trade deficit widens to €3bn from in June, reflecting a decent 1.4% rise in exports which was swamped by a price-driven 3% surge in imports. Despite the last two monthly deficits, because import prices have risen so sharply, it is likely that net exports were still positive in real terms in Q2, which implies that the fall in Euroland GDP growth was driven by domestic factors. We’ll get more detail on Q2 GDP in early Sep.

UK house prices down 2.3% in Aug. The monthly decline in the Rightmove estate agents’ network index was the steepest yet this year, although the 4.8% yr pace of annual price decline is less steep than that shown by the major lenders’ house price data.

Japan’s Ministry of Economy, Trade and Industry has drafted legislation that would exempt from taxes the dividends that domestic companies receive from foreign affiliates in which they hold stakes of 25% or more, in a bid to get firms to send the money they earn abroad back to Japan. Retained earnings at overseas affiliates have been on the rise, with a METI survey showing that they totalled a record 17.2 trillion yen in the 2006 fiscal year.

Outlook

NZD could be range-bound near term, with a quiet domestic calendar and some help from trimming of NZD shorts after recent NZ data fell short of the gloomiest scenarios. We have switched our short NZD TWI stance to neutral for now.

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Published on  Tue, Aug 19 2008, 06:42 GMT