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Dollar Up As Leading Indicators Gain For Second Month
Mon, May 19 2008, 16:14 GMT
by Grace Cheng
GraceCheng.com
The US dollar is higher against currencies like the Euro, Swiss franc, British pound and the Japanese yen Monday. US Conference Board’s index of leading economic indicators rose by 0.1% in April to a reading of 102.0, matching the gain seen in March, and was in line with expectations. This private research group even said that even though the data certainly reflects a weak economy, it does not reflect one that’s in recession, and also noted that the small gains in the leading index for both March and April could be a signal that the economy may not weaken further. March’s gain was the first gain since September last year. A broad US economic recovery depends largely on the housing market, and if this sector doesn’t improve by the end of this year, it would continue to put a drag on growth. Billionaire investor Warren Buffett said today that the housing market “may get worse”.
Different Fates For Aussie and Kiwi Dollar
The Australian dollar reached a fresh 24-year high of 0.9570 against the US dollar Monday on rising demand for commodities such as gold. Gold, which is Australia’s third-most valuable export, gained 1.6% to $899.90 an ounce last week, boosting the coffers of gold exporters and the Aussie government. The New Zealand dollar didn’t share the good fortune of the Aussie though. Since two months ago, NZD/USD has been sliding steadily even as commodities have gone higher, on speculation that the New Zealand central bank may have to cut its main interest rates aggressively from its current 8.25% as NZ home sales fell to a 16-year low in April and employment fell the most since 1989.
ECB Says
European Central Bank’s chief Trichet said today that problems relating to the credit crunch are not yet over, and warned about the need to contain inflation. He said, “It is an ongoing, very significant market correction.” ECB’s Kranjec said that the ECB decision to keep interest rates unchanged at 4% was the correct one, and that data shows that European economic fundamentals are strong.
Forex Trading
USD/CHF fell to 1.0415, but then bounced almost 100 pips to 1.0510. As mentioned earlier, dollar strength could continue if USD/CHF can hold above 1.0390-1.0400, but if this support gives way, USD/CHF could target 1.0360, 1.0310.
EUR/USD went up to 1.5635, but remains capped by resistance around 1.5650. Its nearest support is around 1.5500-20. Tuesday’s release of the ZEW economic sentiment for May will be a potential market mover for the Euro. Before that happens, it is expected to trade in a narrow range.
The British pound went up to 1.9625 against the US dollar Monday, but later gave up its gains, falling below 1.9500 after the Bank of England said last week that a UK recession cannot be ruled out.
Published on
Mon, May 19 2008, 16:15 GMT
Archive
- Dollar Rally Likely To Stall Ahead Of US GDP Data
Published On Thu, Jul 31 2008, 08:39 GMT
- Near-Term Rally Of Dollar A Possibility As Fed's Plosser Voices Out Rate Hike Urgency
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- Stay Profitable In These Volatile Market Conditions By Making Quick Trades
Published On Mon, Jul 21 2008, 09:35 GMT
- Bernanke's Bleak Outlook Could Pressure Dollar To Further Record Lows Against Euro
Published On Wed, Jul 16 2008, 10:10 GMT
- US Dollar On The Defensive Ahead Of Bernanke's Testimony And Retail Sales Data
Published On Tue, Jul 15 2008, 09:14 GMT
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