Market Review – 10/12/2010 21:24 GMT
Dollar rebounds against yen on upbeat U.S. economic data
The dollar traded firmly against the Japanese yen in New York session as strong U.S. consumer sentiment and trade data suggested the recovery of the American economy was on the track.
The greenback was under pressure in Asia and European morning due to dollar’s broad-based weakness, the pair fell marginally below Thursday’s 83.51 low to to 83.45, however, price swiftly rebounded strongly from there and later climbed to an intra-day high of 84.02 in NY session after release of robust economic data. U.S. trade balance posted a 38.71 billion trade deficit, much narrower than the economists’ forecast of 43.60 billion deficit while University of Michigan consumer sentiment index rose to 74.2 in December (forecast was 71.5) from 71.6.
Although the single currency traded with a firm undertone in Asia and ratcheted higher to 1.3283 in Europe, renewed selling capped euro’s upside and the pair later fell to as low as 1.3178 in NY session before staging a recovery. EU heads of state and government would hold a meeting on 16-17 December to discuss the debt crisis. German Chancellor Angela Merkel and French President Nicolas Sarkozy said before the meeting that they opposed increasing the EU’s 440 billion euro rescue fund and rejected joint euro-area bonds. These comments pressured euro but the single currency found support and rebounded as ECB President Trichet said he believed the eurozone recovery was on track.
The British pound initially dipped to 1.5748 at Asian opening, however, cable quickly rebounded on renewed buying and then rose strongly to 1.5863 in Europe but later retreated in tandem with euro due to dollar’s strength in NY session before staging a rebound. On economic front, U.K. PPI rose by 0.3% m/m and 3.9% y/y in October whilst core PPI rose by 0.2% m/m n 3.3% y/y respectively.
In other news, China raised banks’ required reserves ratio by 50 basis points on Friday and PBOC was expected to have another rate hike in the near future. The Chinese economic data (including CPI data) due out over the coming weekend were closely watched.
Economic indicator to be released next week include:
UK Rightmove hse prices, Swiss PPI, UK PPI data, Canada capacity utilisation on Monday, NZ retail sales, Australia’s business confidence, UK CPI and RPI, Germany ZEW, US PPI, Retail sales and Fed rate decision on Tuesday, Japan Tankan capex, UK jobs data, Swiss ZEW, US CPI data, real earnings, industrial production on Wednesday, Germany Services PMI, Manufacturing PMI, UK retail sales and US current account, housing starts on Thursday, Germany Ifo index and US leading indicators on Friday.