Market Review – 02/08/2011 21:57 GMT
Swiss franc surges to fresh highs on concerns over global economic growth and debt level
The Swiss franc rallied against the dollar and euro to fresh all-time highs Tuesday on risk aversion as investors were still worried about the global economic growth and debt levels in U.S. and Europe. The U.S. bill to increase the debt ceiling and reduce the deficit passed the Senate and was signed into law, narrowly avoiding the Aug. 2 deadline.
Versus the Swiss franc, despite dollar’s brief recovery to 0.7857, renewed selling sent the pair lower and price tumbled below Monday’s low of 0.7733 to a fresh lifetime low of 0.7620 ahead of NY closing due to the selloff in global stock markets on increasing worries about weakness in U.S. economy. Eur/chf also plunged below 1.1030 to a fresh all-time low of 1.0820.
DJI tumbled by 2.19% or 265.87 points and closed the day below 12,000 level at 11,866.62. FTSE-100, CAC-40 and DAX also tanked by 0.97%, 1.82% and 2.26% respectively.
Versus the Japanese yen, the greenback extended Monday’s rebound from 76.29 to 77.85 in Asian morning. However, lack of follow-through buying pressured the pair and price dropped to 77.17 in European morning due to active cross buying of yen (eur/jpy tumbled from 111.01 to 109.21). Later, usd/jpy fell marginally to 76.97 at NY midday after the release of weaker-than-expected U.S. personal consumption which came in at -0.2% vs forecast of 0.2%.
Although the single currency climbed above Monday’s NY high of 1.4273 to 1.4283 in Asian morning, renewed selling pressured the pair and price tumbled below Monday’s low of 1.4185 to 1.4151 in NY morning due to active cross selling of euro. Despite euro’s rebound to 1.4183 after weaker-than-expected U.S. June personal consumption together with active cross buying of euro vs gbp (eur/gbp rebounded from 0.8699 to 0.8770), the pair fell again to 1.4176 in NY afternoon due to the selloff in global stock markets on worries over the growth of U.S. economy.
The British pound edged higher from Monday’s NY low of 1.6238 to 1.6329 at European opening. However, cable then fell in tandem with euro and tanked below 1.6238 to 1.6224 in NY morning before staging a recovery to 1.6316 in NY afternoon.
The Australian dollar fell from Asian high at 1.1008 and then tumbled sharply after RBA kept its target rate at 4.75% and said it ‘remains concerned about the medium-term outlook for inflation.’ Aud/usd eventually tanked to 1.0779 near NY closing.
Spot gold surged by more than 2.0% to a fresh lifetime high at 1658.50 in NY afternoon on safe-haven buying due to the selloff of U.S. and European stocks.
On the other news, rating agency Fitch said ‘the deal reached is commensurate with AAA rating; agreement is clearly a step in the right direction; U.S. must also confront tough choices on tax and spending against a weak economic back drop.’
Data to be released on Wednesday include:
China Non-manufacturing PMI, HSBC Services PMI, Australia Retail sales, Germany Services PMI, EU Services PMI, U.K. Services PMI, BRC Shop Price Index, EU Retail sales, U.S. ADP employment, Durable goods (rev.), ex. Defense (rev.), ex. Transport (rev.), Factory orders, ISM non-manufacturing.