Market Review – 04/02/2010 22:57 All times in GMT
Dollar and yen roar on renewed risk aversion as fiscal woes in Europe continue
Euro plunged to a more than eight-month low against the dollar and a nearly 1-year low against the yen as worries that Portugal as well as Spain would face financial problems as Greece continued to pressure the single currency lower on Thursday.
The single currency tumbled from 1.3903 in Asian morning and picked up more downward momentum, hitting a 7-month low of 1.3722 in NY afternoon after European Central Bank President Jean-Claude Trichet said in a preses conference that many euro area countries will have large and sharply rising fiscal imbalances. On other news, earlier ECB held rates unchanged at 1.0% as widely expected. The worse-than-expected German factory orders, which dropped unexpectedly by 2.7% m/m in December versus the economists’ forecast of a rise of 0.2% m/m with downwardly revised of 2.7% m/m increase in November, also weighed on euro.
The greenback weakened against the Japanese yen from the high of 91.09 in European opening on renewed risk aversion. After the release of worse-than-expected US jobless claims, the pair fell further on cross buying in the Japanese yen. (Eur/jpy and Gbp/jpy tumbled to their lows of 121.57 and 139.39 in U.S session respectively). U.S. jobless claims rose unexpectedly last week. Initial claims increased 8,000 to a seasonally adjusted 480,000 with analysts’ forecast of a fall to 460,000 from a revised previous reading of 472,000. The pair hit an intra-day low of 88.55 in NY afternoon on the selloff in U.S. equities. DJI ended the day down 268 points to 10002.18.
Cable extended recent decline from intra-day high of 1.5921 due to the dollar’s broad-based strength. Although sterling was able to rebound against the greenback after the Bank of England announced to keep rates unchanged at 0.5% and to pause in asset purchases under quantitative easing, renewed selling around 1.5885/90 pushed the pair to as low as 1.5731 in NY afternoon.
Data to be released on Friday include Japan leading indicators, U.K. PPI input, PPI output, Germany industrial production, Canada unemployment rate, U.S. average hourly earnings, non-farm payrolls and unemployment rate.