Daily Market Outlook

Wed, Jul 9 2008, 04:24 GMT
by AceTrader Team

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Market Review - 08/07/2008 22:16 GMT

The greenback rises on lower oil prices and Bernanke's remarks

Although dollar retreated against major currencies earlier on Monday, the buck staged a strong rebound across the board on Tuesday on Federal Reserve chairman Ben Bernanke's comments as he said the central bank is willing to keep its emergency lending facility open into 2009 for some U.S. financial institutions. Bernanke said the Fed was considering options, if the current unusual circumstances persist in the dealer funding markets, that the Fed will extend the duration of the central bank's facilities for primary dealers beyond the end of the year.  
  
The Dow Jones index rose over 150 points on Bernanke's remarks as his comments calmed global investors after early report from Lehman Brothers which suggested that U.S. government state-sponsored mortgage lenders Fannie Mae and Freddie Mac would have to raise additional capital (approx. $75 bln).  
  
The greenback rebounded against Japanese yen on renewed carry trade activities, usd/jpy jumped from intra-day low of 106.25 to 107.55 whilst the single currency slipped from 1.5740 to New York low of 1.5635 before recovering in late trading. The British pound weakened from 1.9797 to 1.9666 against the dollar.  
  
The decline in crude oil prices also helped to support dollar, U.S. crude oil fell for a second day, dropping more than 3 percent to $135.90 yesterday, after reaching a record high of $145.85 a barrel on July 3. Comments from U.S. Treasury Secretary Henry Paulson gave extra boost to the buck as he said the Treasury was working on ways to shore up mortgage financing.  
  
On the data front, pending home sales came in weaker than expected and declined by 4.7% in May, well below analysts' forecast of -2.8%, however, the number had little impact on the forex markets as the focus was on Bernanke's speech.   
  
On Wednesday, economic data releases include German trade balance and current account, U.K. trade balance plus eurozone GDP Q1 data and Canadian housing starts.

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Published on  Wed, Jul 9 2008, 06:12 GMT

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