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Market Review - 10/08/2009 22:00 All times in GMT
Dollar extends gains ahead of Fed meeting and in the aftermath of last week's strong U.S. jobs data
The dollar gained for a third day in a row against a basket of currencies on Monday as investors continued to trade on the strong U.S. jobs figures from Friday. Traders cited that they are waiting to see if the dollar’s move was a sign of a breakdown of the recent correlation between the U.S. dollar and risk demand in which positive economic news would weaken the dollar as investors flocked to riskier assets. Furthermore, investors are awaiting the Federal Reserve’s statement after its policy meeting ends on Wednesday. The central bank is widely expected to hold the overnight Fed funds rate in a range between 0.00-0.25%. Although short-covering lifted euro up to 1.4219 against the greenback in European morning, the pair tumbled to 1.4104 on Monday on dollar’s broad-based strength. Dollar also rose against the Swiss franc to as high as 1.0885 in New York afternoon.
The British pound fell against the greenback on Monday as stock markets snapped two-day gains and also due to the fallout from the Bank of England’s decision last week to expand asset purchases, which sparked concerns that the worst of the U.K economy has not passed yet. In addition, BoE’s expansion of the QE program raised expectations for a dovish tone in the central bank’s Inflation Report due on Wednesday. That was in sharp contrast to the dollar which held most of its gains made on Friday after data showed U.S. job losses slowed last month, boosting speculation for higher U.S. rates. Cable hit as low as 1.6431 in New York afternoon trade. Cross selling in sterling versus euro and yen also weighed on the price as eur/gbp rallied from 0.8497 to 0.8599 while gbp/jpy dropped from 162.90 to 159.42.
Elsewhere in the markets, Canadian dollar fell for a third day on U.S. dollar’s broad-based firmness and hit 1.0929 on Monday. In addition, investors speculated that the government believes the Canadian dollar strengthened too much as Finance Minster Jim Flaherty said last week that ‘steps could be taken’ to weaken it.
The Japanese yen advanced versus higher-yielding currencies as decline in U.S. and European equity markets increased demand for the yen as a safe-haven asset. Eur/jpy dropped from 138.54 to 136.91, aud/jpy declined from 82.00 to 80.87 and gpb/jpy tumbled from 162.90 to 159.42. Earlier in the day, a Ministry of Finance report showed a moderation in the decline in exports as the nation’s current account surplus more than doubled in June from a year earlier to 1.15 trillion yen.
Data to be released on Tuesday include Japan BoJ rate decision, consumer confidence, Australia NAB business confidence, German CPI, WPI, U.K BRC retail sales, RICS house prices, DCLG house prices, trade balance, Canada housing starts, U.S. productivity, labour cost and wholesale inventories.
Dollar extends gains ahead of Fed meeting and in the aftermath of last week's strong U.S. jobs data
The dollar gained for a third day in a row against a basket of currencies on Monday as investors continued to trade on the strong U.S. jobs figures from Friday. Traders cited that they are waiting to see if the dollar’s move was a sign of a breakdown of the recent correlation between the U.S. dollar and risk demand in which positive economic news would weaken the dollar as investors flocked to riskier assets. Furthermore, investors are awaiting the Federal Reserve’s statement after its policy meeting ends on Wednesday. The central bank is widely expected to hold the overnight Fed funds rate in a range between 0.00-0.25%. Although short-covering lifted euro up to 1.4219 against the greenback in European morning, the pair tumbled to 1.4104 on Monday on dollar’s broad-based strength. Dollar also rose against the Swiss franc to as high as 1.0885 in New York afternoon.
The British pound fell against the greenback on Monday as stock markets snapped two-day gains and also due to the fallout from the Bank of England’s decision last week to expand asset purchases, which sparked concerns that the worst of the U.K economy has not passed yet. In addition, BoE’s expansion of the QE program raised expectations for a dovish tone in the central bank’s Inflation Report due on Wednesday. That was in sharp contrast to the dollar which held most of its gains made on Friday after data showed U.S. job losses slowed last month, boosting speculation for higher U.S. rates. Cable hit as low as 1.6431 in New York afternoon trade. Cross selling in sterling versus euro and yen also weighed on the price as eur/gbp rallied from 0.8497 to 0.8599 while gbp/jpy dropped from 162.90 to 159.42.
Elsewhere in the markets, Canadian dollar fell for a third day on U.S. dollar’s broad-based firmness and hit 1.0929 on Monday. In addition, investors speculated that the government believes the Canadian dollar strengthened too much as Finance Minster Jim Flaherty said last week that ‘steps could be taken’ to weaken it.
The Japanese yen advanced versus higher-yielding currencies as decline in U.S. and European equity markets increased demand for the yen as a safe-haven asset. Eur/jpy dropped from 138.54 to 136.91, aud/jpy declined from 82.00 to 80.87 and gpb/jpy tumbled from 162.90 to 159.42. Earlier in the day, a Ministry of Finance report showed a moderation in the decline in exports as the nation’s current account surplus more than doubled in June from a year earlier to 1.15 trillion yen.
Data to be released on Tuesday include Japan BoJ rate decision, consumer confidence, Australia NAB business confidence, German CPI, WPI, U.K BRC retail sales, RICS house prices, DCLG house prices, trade balance, Canada housing starts, U.S. productivity, labour cost and wholesale inventories.
