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Daily Market Outlook

Tue, Sep 30 2008, 07:04 GMT
by AceTrader Team

AceTrader

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Market Review -    29/09/2008 21:28 GMT

Dollar drops versus Japanese yen and Swiss franc as U.S. Congress rejects bailout package

The greenback fell sharply against the Japanese yen and Swiss franc on risk aversion as the U.S. House of Representatives rejected the $700 billion Wall street bailout package by a vote of 228-205 together with the selloff in global stock markets.  
  
Dow Jones Industrial average index tumbled by 777 points to 10,365, its biggest intra-day decline ever. The U.S. currency weakened from 106.97 to 104.01 and from 1.1088 to 1.0813 against the Japanese yen and Swiss franc respectively. Euro fell sharply from 155.10 to 150.14 and from 1.5945 to 1.5688 versus Japanese yen and Swiss franc respectively.  
  
The single currency started to tumble in European session as authorities were forced to rescue banks in several countries. Belgian, Dutch and Luxembourg governments nationalized parts of banking and insurance group Fortis and agreed to inject 11.2 billion euros into the financial group. Euro fell sharply from 1.4635 to as low as 1.4303 on Monday and then briefly rebounded to 1.4572 in U.S. session on the rejection of U.S. bailout package before falling again on the selloff in crude oil prices.  
  
Sterling dropped from 1.8420 to a 10-day low of 1.7960 after the government nationalized the mortgage lending business of Bradford & Bingley, with the retail branches and deposits sold to Spanish bank Santander. Australian dollar and New Zealand dollar weakened against U.S. currency from 0.8350 to 0.8002 and from 0.6887 to 0.6705 respectively.  
  
Interest-rate futures indicated a 72% chance that the Fed would reduce the 2% target lending rate by a half-percentage point by its October 29 meeting, compared with 32% odds a day ago. There was a 28% chance policy makers would cut by a quarter-percentage point.   
  
Tuesday will see the release of U.K. Gfk survey, Japan’s industrial production, German unemployment rate, U.K. current account and GDP, eurozone HICP, Chicago PMI and consumer confidence.
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Published on  Tue, Sep 30 2008, 07:12 GMT