Market Review – 01/02/2010 23:03 All times in GMT
Dollar rises versus yen on stronger-than-expected U.S. ISM manufacturing data
Dollar/yen opened lower in NZ/Australia trading n fell briefly to 89.76 on cross-buying yen by st specs in reaction to weekend comments made by U.K.’s FSA chairman Adair Turner who said at the World Economic Forum in Davos the so-called carry trades were ‘economically valueless’.
However,the greenback rallied in NY morning trade after the release of much better-than-expected U.S. ISM manufacturing PMI which came in at 58.4 in January, compared to economists’ forecast of 55.5, price subsequently rose to 90.94 due to rebound in European & U.S. stocks. DJI ended the day up 118 points on improved market’s sentiment.
Euro remained under pressure in Asian morning on strong U.S. Q4 GDP last Friday and after-market report by CFTC on Friday which showed futures traders had built up shorts to the highest level in more than a year. As Greek/German 10-year govt. bond yield spread narrowed 20 basis points to 350 basis points together with German and eurozone manufacturing PMI both rose to 53.7 and 52.4 in January from 52.7 as well as 51.6 in December respectively, the single currency rebounded from intra-day 7-month low of 1.3852 (Asia) on short-covering in European morning. The pair picked up more upward momentum and gained to 1.3939 in late NY afternoon.
Although U.K. CIPS manufacturing PMI came out much higher than expected at 56.7 in January compared to economists’ anticipation of 54.0 and well above 54.6 in December, the British pound extended recent decline to as low as 1.5850 on active cross selling in sterling versus euro (eur/gbp rallied from 0.8683 to 0.8769). However, intra-day rebound rebound in euro lifted the British pound due to short-covering.
Data to be released on Tuesday include Australia NAB business confidence, RBA rate decision, Germany retail sales, U.K. PMI construction, EU PPI and U.S. pending home sales.