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Daily Market Outlook

Fri, Sep 26 2008, 00:19 GMT
by AceTrader Team

AceTrader

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Market Review -   25/09/2008 21:41 GMT

U.S. dollar edges higher against the yen as bailout plan nears deal

The greenback edged higher against the Japanese yen on Thursday in volatile trading, buoyed by expectations that the U.S. government was close to a deal on the $700-billion bailout package that would ease credit restrictions and boost lending.   
  
In early U.S. session, the dollar came under pressure after economic data painted a bleak picture of the U.S. housing and labour markets. A separate report showing a sharper-than-expected drop in durable goods orders for August added to the initial gloom. However, after two days of U.S. congressional testimony by top monetary officials, lawmakers said discussions on the deal have progressed significantly and both chambers of congress have reached ‘fundamental agreement’ on the principles that would guide the bailout bill, triggering a round of dollar buying in the afternoon.   
  
The dollar was also supported against the yen as risk appetite for carry trade returned on the back of rising U.S. stock markets and the pair climbed to a session high of 107.03 before retreating to 106.55. The ICE Futures' U.S. dollar index, which measures the value of the greenback against a basket of six currencies, was little changed at 76.970.   
  
In European currencies, the dollar’s broad-based strength in U.S. session pushed the euro and sterling lower to session lows of 1.4561 and 1.8305 respectively before recovering in late New York trading.   
  
Wall Street snapped a three-day losing streak on Thursday as investors cheered the prospect of a bailout deal. The Dow Jones industrial average rose 196 points or 1.82 percent and closed at 11,022, while the Standard & Poor’s 500 index and the Nasdaq Composite Index also advanced 2.14 percent to 1,211 and 1.49 percent to 2,187 respectively.  
  
Investors have now started to focus on which currencies would benefit if the bill is passed by Congress and they have also started to turn their attention on the plan's effectiveness in establishing normal market conditions quickly and bolstering the U.S. economy in the fourth quarter.   
  
On Friday, economic data releases include New Zealand GDP, Japan national CPI, Tokyo CPI, German import price index, CPI and HICP, Switzerland KOF indicator, U.S. GDP, PCE data, personal consumption and University of Michigan confidence. At 11:45GMT, ECB Governing Council member Axel Weber will give a speech on financial markets and monetary policy at a conference in Basel, Switzerland.
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Published on  Fri, Sep 26 2008, 00:22 GMT