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Daily Forex Strategy Briefing

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Yen Gains as Risky Assets Fall

Tue, Sep 9 2008, 23:01 GMT
by Hans Nilsson

CMS Forex

Yen Gains as Risky Assets Fall

• The dollar traded mixed Tuesday as US stocks plunged and investors worried about the capitalization of Lehman Brothers Holdings and Washington Mutual. The greenback consolidated gains against the euro and sterling but rose against the Australian and Canadian dollars. The yen rallied against other key currencies as a drop in global equities reduced holdings of higher-yielding assets. The Canadian and Australian dollars declined as crude oil dropped below $102 a barrel for the first time since April while gold and silver also fell.


• The USD/JPY weakened on increased risk aversion as US stocks tumbled on fears Lehman Brothers may have trouble to shore up their balance sheets and may be next in line for a US government bailout. The pair is trying to break its 5-month uptrend. There is support in the 106-area. If the support is broken, the USD/JPY will likely fall to the 102-area.

Financial and Economic News and Comments

US & Canada

• US pending home sales declined a more-than-expected 3.2% m/m to 86.5 in July after rising 5.8% m/m to 89.4 in June, as forecasts for 2008 sales and prices deteriorate further, according to the National Association of Realtors’ index. The NAR projected existing-home sales at 5.01 million in 2008 and 5.35 million in 2009 (compared with 5.65 million in 2007). The median price for an existing home is seen at $203,600 in 2008 and $208,500 in 2009 (compared with $218,900 in 2007). The US pending home sales seem to have stabilized at a low level, showing continuing fragility in the US housing market.

• US wholesale inventories rose a more-than-forecast 1.4% m/m in July to a seasonally adjusted $441.26 billion, following a downwardly revised 0.9% m/m increase in June, data from the Commerce Department showed. Wholesale sales dropped 0.3% m/m in July to a seasonally adjusted $410.56 billion, the most since February, after an upwardly revised 3.0% m/m rise in June. Inventories rose 10.6% y/y, while sales gained 16.5% y/y.

Europe

• Exports from Germany fell a more-than-expected 1.7% m/m in July, according to data from the Federal Statistics Office. Exports rose 7.0% y/y. Imports rose 7.4% m/m in July, the biggest gain since June 2002. Imports jumped 16% y/y. The trade surplus narrowed to €13.9 billion ($20 billion) in July from €19.9 billion in June. The surplus in the current account narrowed to €11.8 billion from June’s €18.9 billion.

• UK manufacturing production dropped 0.2% m/m in July, a fifth monthly decline and the lowest level in 1 1/2 years, the Office for National Statistics said. The manufacturing index was at 103.3, the lowest since February 2007.

• UK house prices fell as sales dropped to a record low in August. The number of real-estate agents and surveyors saying prices declined in August exceeded those reporting gains by 81 percentage points, compared with 83 percentage points in July, the Royal Institution of Chartered Surveyors said. Average sales per respondent in the past three months dropped to 12.7, the lowest level since the survey began in 1978.

Asia-Pacific

• Japan’s machine tool orders dropped 14.2% y/y in August, following a 8.9% y/y decline in July, the Japan Machine Tool Builders Association said. August machine tool orders fell 10.1% m/m.


• Australia’s business confidence rose to -7 in August, still in negative territory and near the lowest level since the 2001 terrorist attacks in the US, compared with a -9 reading in July, National Australia Bank Ltd. reported. Business conditions rose to -3 in August from -5 in July. The negative figures add to signs of a slowing Australian economy.

• Australian home-loan approvals fell 0.2% m/m in July, a sixth monthly decline and the smallest drop in seven months, following a revised 3.7% m/m fall in June, the statistics bureau said.

FX Strategy Update

Published on  Tue, Sep 9 2008, 23:03 GMT