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Market Review - 21/07/2009 21:51 All times in GMT
Dollar rebounds from six-week low versus euro as Bernanke gives less bullish outlook on U.S. economy
Dollar rebounded from a six-week low against the euro on Tuesday after Federal Reserve Chairman Ben Bernanke gave a cautious assessment on the U.S. economy, renewing demand for safe-haven investments. Bernanke said that the outlook for the long-suffering U.S. economy appears to be improving and the U.S. central bank was carefully reviewing ways to withdraw its massive monetary policy stimulus when conditions permit, however, Bernanke warned that unemployment was likely to remain high into 2011 and this could hurt fragile consumer confidence and potentially undermine what is expected to be a very gradual recovery. In addition, speculation that troubled U.S. lender CIT group may need to file for bankruptcy (in the event it is unable to tender for notes maturing next month) also gave a boost to the greenback.
Euro rose to as high as 1.4278 against the dollar in New York morning session as risk appetite continued to improve after Caterpillar Inc., a heavy equipment maker, posted a second-quarter profit and gave an upbeat earnings outlook for 2009. However, the single currency then fell sharply to an intra-day low of 1.4164 as Bernanke's comments revived the greenback's safe-haven appeal before rebounding in late trading. DJI ended up 67.79 points or 0.77%, Nasdaq gained 6.91 points or 0.36% and S&P 500 added 3.45 points or 0.36%.
The British pound fell against the dollar after hitting a three-week high at 1.6560 on Monday as the U.K. budget deficit climbed in June to the widest since records began in 1993. The public sector posted a net cash requirement of 19 billion pounds in June, slightly lower than economists’ forecasts of 20 billion. The data fueled concerns that the government will struggle to find buyers for its assets. Investors worried that a twin deficit (budget and current account) situation will happen in the U.K. eventually. Sterling hit as low as 1.6383 versus the greenback after rebounding in New York morning, however, the pound declined again after Bernanke’s testimony before recovering some of its intra-day losses as DJI turned into positive territory and dampened dollar’s safe-haven appeal.
The dollar dropped sharply versus the Japanese yen to 93.27 in New York morning session as traders bought the Japanese currency as a safe-haven play. Aud/jpy declined to as low as 75.66 while gbp/jpy fell from 156.05 to 153.15 before rebounding later in the day.
The Bank of Canada left its benchmark interest rate at a record low of 0.25% as widely expected and said a stronger Canadian dollar is moderating the economic recovery. At the last rate decision on June 4, policymakers said the stronger currency could 'fully offset' signs of a recovery.
Data to be released on Wednesday include eurozone industrial orders, Canada retail sales and U.S. house price index.
Dollar rebounds from six-week low versus euro as Bernanke gives less bullish outlook on U.S. economy
Dollar rebounded from a six-week low against the euro on Tuesday after Federal Reserve Chairman Ben Bernanke gave a cautious assessment on the U.S. economy, renewing demand for safe-haven investments. Bernanke said that the outlook for the long-suffering U.S. economy appears to be improving and the U.S. central bank was carefully reviewing ways to withdraw its massive monetary policy stimulus when conditions permit, however, Bernanke warned that unemployment was likely to remain high into 2011 and this could hurt fragile consumer confidence and potentially undermine what is expected to be a very gradual recovery. In addition, speculation that troubled U.S. lender CIT group may need to file for bankruptcy (in the event it is unable to tender for notes maturing next month) also gave a boost to the greenback.
Euro rose to as high as 1.4278 against the dollar in New York morning session as risk appetite continued to improve after Caterpillar Inc., a heavy equipment maker, posted a second-quarter profit and gave an upbeat earnings outlook for 2009. However, the single currency then fell sharply to an intra-day low of 1.4164 as Bernanke's comments revived the greenback's safe-haven appeal before rebounding in late trading. DJI ended up 67.79 points or 0.77%, Nasdaq gained 6.91 points or 0.36% and S&P 500 added 3.45 points or 0.36%.
The British pound fell against the dollar after hitting a three-week high at 1.6560 on Monday as the U.K. budget deficit climbed in June to the widest since records began in 1993. The public sector posted a net cash requirement of 19 billion pounds in June, slightly lower than economists’ forecasts of 20 billion. The data fueled concerns that the government will struggle to find buyers for its assets. Investors worried that a twin deficit (budget and current account) situation will happen in the U.K. eventually. Sterling hit as low as 1.6383 versus the greenback after rebounding in New York morning, however, the pound declined again after Bernanke’s testimony before recovering some of its intra-day losses as DJI turned into positive territory and dampened dollar’s safe-haven appeal.
The dollar dropped sharply versus the Japanese yen to 93.27 in New York morning session as traders bought the Japanese currency as a safe-haven play. Aud/jpy declined to as low as 75.66 while gbp/jpy fell from 156.05 to 153.15 before rebounding later in the day.
The Bank of Canada left its benchmark interest rate at a record low of 0.25% as widely expected and said a stronger Canadian dollar is moderating the economic recovery. At the last rate decision on June 4, policymakers said the stronger currency could 'fully offset' signs of a recovery.
Data to be released on Wednesday include eurozone industrial orders, Canada retail sales and U.S. house price index.
