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Market Review - 26/08/2008 21:45 GMTU.S. dollar rises to a six-month high versus euro on weak eurozone data
The greenback rose to a six-month high against the euro on Tuesday as
eurozone data suggested economic weakness had spreaded out beyond the
United States, which may imply an interest rate cut by European Central
Bank while a jump in U.S. consumer confidence and new home sales also
helped to boost the dollar.
Earlier in the day, the single currency tumbled versus the dollar following the release of German Ifo data which showed that the institution business climate index in August fell more than expected to a three-year low of 94.8 with gross domestic product shrank in the second quarter for the first time since 2004 to -0.5 percent, while the Gfk consumer sentiment index also hit a five-year low at 1.5. The euro fell against the dollar to a six-month low at 1.4570 before rebounding on the back of rising oil prices to trade at 1.4656 at New York closing. The crude oil for October delivery rose $1.22 per barrel after an initial drop to $112.36 and ended at $116.33.
In contrast, U.S. economic data was less bleak. U.S. consumer confidence rose in August to 56.9 from previous month's reading of 51.9, while the sales of newly constructed U.S. single-family homes in July posted a 2.4 percent increase from an almost 17-year low in June. The reports fueled further dollar buying and the dollar index climbed to a 2008 high of 77.619, ending the day up 0.6 percent at 77.229. The U.S. currency also rose against the Swiss franc to a session high of 1.1087 as other currencies tracked the euro lower. The British pound fell to a fresh two-year low against the dollar to 1.8330 before rebounding and was last trading at 1.8401.
Against the Japanese yen, the dollar was up 0.3 percent at 109.61 at New York closing while euro also rebounded from its intra-day low of 159.92 and ended at 160.60.
Ongoing worries that other countries are vulnerable to U.S. economic weakness and jitters about the health of the financial services industry prompted investors to unwind trades where they use low-yielding currencies to fund purchases of these assets. The Australian dollar to an 11-month low of 0.8493, before recovering to 0.8550, down 0.9 percent on the day. The New Zealand dollar also came under pressure after posting its highest monthly trade deficit in 11 months in July and fell to 0.6898 versus the U.S. currency.
Currency investors took little notice of the Federal Reserve's minutes of its last meeting, which earlier this month saw a weakening economic outlook and ongoing stress in the financial markets. The Fed said the outlook supported the case for steady U.S. interest rates despite persistent inflation concerns.
On Wednesday, economic data releases includes German import price index, prelimnary CPI and HICP, U.S. durable goods orders and Midwest manufacturing.
Market Review - 26/08/2008 21:45 GMT
U.S. dollar rises to a six-month high versus euro on weak eurozone data
The greenback rose to a six-month high against the euro on Tuesday as
eurozone data suggested economic weakness had spreaded out beyond the
United States, which may imply an interest rate cut by European Central
Bank while a jump in U.S. consumer confidence and new home sales also
helped to boost the dollar. Earlier in the day, the single currency tumbled versus the dollar following the release of German Ifo data which showed that the institution business climate index in August fell more than expected to a three-year low of 94.8 with gross domestic product shrank in the second quarter for the first time since 2004 to -0.5 percent, while the Gfk consumer sentiment index also hit a five-year low at 1.5. The euro fell against the dollar to a six-month low at 1.4570 before rebounding on the back of rising oil prices to trade at 1.4656 at New York closing. The crude oil for October delivery rose $1.22 per barrel after an initial drop to $112.36 and ended at $116.33.
In contrast, U.S. economic data was less bleak. U.S. consumer confidence rose in August to 56.9 from previous month's reading of 51.9, while the sales of newly constructed U.S. single-family homes in July posted a 2.4 percent increase from an almost 17-year low in June. The reports fueled further dollar buying and the dollar index climbed to a 2008 high of 77.619, ending the day up 0.6 percent at 77.229. The U.S. currency also rose against the Swiss franc to a session high of 1.1087 as other currencies tracked the euro lower. The British pound fell to a fresh two-year low against the dollar to 1.8330 before rebounding and was last trading at 1.8401.
Against the Japanese yen, the dollar was up 0.3 percent at 109.61 at New York closing while euro also rebounded from its intra-day low of 159.92 and ended at 160.60.
Ongoing worries that other countries are vulnerable to U.S. economic weakness and jitters about the health of the financial services industry prompted investors to unwind trades where they use low-yielding currencies to fund purchases of these assets. The Australian dollar to an 11-month low of 0.8493, before recovering to 0.8550, down 0.9 percent on the day. The New Zealand dollar also came under pressure after posting its highest monthly trade deficit in 11 months in July and fell to 0.6898 versus the U.S. currency.
Currency investors took little notice of the Federal Reserve's minutes of its last meeting, which earlier this month saw a weakening economic outlook and ongoing stress in the financial markets. The Fed said the outlook supported the case for steady U.S. interest rates despite persistent inflation concerns.
On Wednesday, economic data releases includes German import price index, prelimnary CPI and HICP, U.S. durable goods orders and Midwest manufacturing.
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