Market Review – 17/04/2010 03:39GMT
Dollar and yen rally on news of Goldman fraud charges
Dollar together with the Japanese yen rallied across the board on Friday as news of fraud charges brought by U.S. regulators led to selloff in global stocks markets, spooking investors to unwind risky assets and fled to U.S. dollar and the yen as safe haven. Renewed market woes over Greece’s debt problems added pressure on the euro.
Versus the Japanese yen, the dollar was under intense selling pressure and declined from 93.15 in Australia on risk aversion due to renewed woes on Greece’s debt problems. Despite brief but strong rebound to 93.11 in European mid-day due to a Japan lawmaker’s call for monetary easing, the pair later tumbled to 91.90 in NY mid-day as the news of Goldman Sachs Group Inc (GS.N) was charged with fraud by the U.S. Securities and Exchange Commission spooked the market, leading investors to dump riskier assets such as stocks and euro for safe haven currencies like yen and dollar. Both commodity currencies and stocks tumbled on renewed risk aversion and DJI ended the day down by 125.91 points at 11018.66. Aud/jpy slumped from 86.99 to 84.94 while gbp/jpy weakened from 144.09 to 141.37 and eur/jpy also dropped from 126.40 to 123.86.
The single currency remained under pressure throughout the day. Despite a brief pullback to 1.3586, euro retreated from there and tumbled below Thursday’s low of 1.3521 to 1.3472 on active cross selling in euro versus the Japanese yen due to renewed risk aversion caused by the Goldman news. Uncertainty on how the EU-IMF aid would work in practice continued to pressure euro. In other news, EU posted 2.6 billion euros trade surplus in February versus the economists’ forecast of a 1.0 billion deficit while EU inflation in March was 0.9% as expected.
On the economic front, U.S. housing starts rose by 1.6% to 626,000 unit rate in March (forecast was 610,000 unit rate) versus 616,000 in February whilst building permits increased by 7.5% to 685,000 unit rate against the economists’ forecast of 630,000. U.S. Michigan consumer sentiment came in at 69.5, well below the economists’ expectation of 75.0.
Economic data to be released on next week include: U.K. Rightmove hse prices, Japan Consumer confidence, U.S. Leading indicators on Monday, New Zealand CPI, Germany PPI, EU Current account, U.K. CPI, Germany ZEW index, Canada BOC rate decision on Tuesday, Japan Leading indicators, U.K. Avg. earnings, U.K. Claimant count, U.K. ILO unemployment rate, Canada Wholesale sales on Wednesday, Japan Trade balance, Swiss Trade balance, Germany Manufacturing PMI, Services PMI, EU Manufacturing PMI, Services PMI, U.K. Retail sales, Swiss ZEW index, U.S. Jobless claims, PPI, Existing home sales, Canada Leading indicators on Thursday, Germany Ifo index, U.K. GDP, EU Industrial orders, Canada CPI, U.S. Durable goods, U.S. New home sales, Canada Retail sales on Friday.