Market Review – 09/11/2010 22:59 GMT
Dollar surges broadly on risk aversion and rise in Treasury yields
The greenback rose strongly against major currencies on Tuesday as investors became cautious ahead of G-20 meeting on Thursday and Friday. The yields of U.S. 30-year Treasury bond climbed to a five-month high, boosting investors’ demand for the greenback.
Dollar dropped sharply from 81.23 against the Japanese yen in Asian morning on risk aversion after China’s SAFE announced it would crack down on speculative ‘hot money’ flowing into the country and weakened to 80.54 in Europe. However, the greenback staged a strong rebound on dollar’s broad-based rally together with the rise in U.S Treasury yield and the pair surged to 81.98 ahead of NY closing.
The single currency weakened in Asia and dropped to 1.3824 in European morning on eurozone peripheral debt concerns together with cross selling in euro. 10-year Irish-German government bond yield spread widened to a record high of 571 basis points. Despite euro’s strong recovery to 1.3974 on short-covering, euro tumbled below 1.3824 to 1.3751 near NY closing on dollar’s broad-based firmness.
The British pound fell in tandem with euro to 1.6073 in European morning after initial rebound from 1.6067 on active cross buying in sterling. Although cable later rose to 1.6183 after the early release of U.K. industrial production and manufacturing production data for September which were in line with expectations, sterling tumbled to 1.5952 in NY afternoon on dollar’s broad-based rally together with cross unwinding in sterling versus euro (eur/gbp rebounded from 0.8590 to 0.8645).
The commodity currencies tumbled on Tuesday as aud/usd sank from 1.0175 to 0.9997. Nzd/usd tanked from 0.7914 to 0.7760 while usd/cad rebounded strongly from 0.9980 to 1.0095. Spot gold tumbled from 1424.50 to 1385.30 due to dollar’s broad-based rally.
Economic data to be released on Wednesday include:
Australia W’pac consumer confi., Japan Consumer confidence, Germany WPI, U.S. Trade balance (usd) , Export price index, Import price index, Jobless claim, Fed budget, Canada Trade balance (cad) , Exports, Imports.