Market Review – 29/09/2010 23:04 GMTDollar falls to 5-month low against euro on speculation of Fed’s further easingThe single currency rose to a fresh 5-month high against the dollar on Wednesday as recent weak U.S. economic data fueled speculation that the U.S. Federal Reserve will embark on a second round of quantitative easing. The dollar index, which tracks the greenback against a basket of currencies, dropped to a 8-month low at 78.616.
Earlier, despite euro’s sideways trading in Asia, the single currency rose to a new 5-month high in NY afternoon after a volatile see-saw trade in European session in NY morning on speculation that U.S. Fed would pump more money to stimulate the economy. In addition, Irish Foreign Minister Micheal Martin’s comment also supported the single currency as he said in an interview on national broadcaster RTE, he confirmed government to unveil final bill for Anglo Irish Bank on Thursday. He added that investors will get the definite picture on Thursday and government is determined to get budget deficit back to 3% of GDP. Cross-buying versus the British pound also lifted the single currency as eur/gpb rose to a four-month high at 0.8645.
The greenback fell to a fresh post-intervention low of 83.50 in early European morning on repatriation talks ahead of the end of the first half of Japan’s fiscal year on Sept. 30. Despite staging a brief but strong rebound to 83.93 in NY morning due to talk of a U.S. think tank’s report saying the BoJ is keen on weakening the yen but is more likely to consider alternative measures, selling interest there pushed the dollar back to 83.55/60 before trading sideways in NY afternoon.
In the other news, Japan’s Economics Minister Banri Kaieda said in an interview with DJ Newswire that ‘Japan will take decisive steps on currencies if needed, but intervention is a temp. measure and the government does not want to ‘skew’ the market.’ He also added Japan’s intervention isn’t leading other countries to competitively devalue their currencies and it doesn’t mean that Japan can’t call for more flexibility in the Chinese yuan.
Although short-covering lifted the British pound to an intra-day high at 1.5878, cable then retreated sharply to 1.5762 on renewed cross selling especially versus the euro. UK mortgage approvals figures showed approvals fell to a 7-month low in August, suggesting UK economic recovery is anything but strong.
Economic data to be released on Thursday include:
U.K. Gfk survey , Japan Manufacturing PMI, Industrial prod’n, Retail sales, Construction orders, Housing starts, Germany Unemployment change, Unemployment rate, EU HICP flash, Canada GDP, U.S. PCE, PCE core, GDP deflator, Jobless claims n the closely watched GDP annualised n Chicago PMI.
