Market Review – 26/08/2010 22:45 GMTDollar falls against most major currencies on risk aversions ahead of Bernanke’s speech
The greenback dropped against most major currencies on Thursday, as investors were cautious ahead of U.S. Federal Reserve Chairman Bernanke’s speech on Friday and expected he will say the central bank will do more to boost the economy.
Although the greenback edged higher against the Japanese yen after initial fall from 84.89 in Australia and rose to 84.82, dollar fell from there and dropped to 84.41 at NY opening. Later, despite dollar’s rebound from there to 84.72 after the release of better-than-expected U.S. weekly jobless claims, which fell to 473,000 (forecast was 490,000) from upwardly revised 504,000 prior week, the price fell again to 84.32 in NY afternoon as weakness in DJI sparked risk aversion.
The greenback was under pressured as investors were cautious ahead of U.S. Federal Reserve Chairman Ben Bernanke’s speech and awaited more clarity on what methods the Fed might use to maintain the pace of the recovery. Bernanke will give the speech at 14:00GMT on Friday in the annual Federal Reserve conference in Jackson Hole, Wyoming.
DJI rose initially but eventually pared all of its early gains and closed the day below 10000 level at 9986, down by 74 points or -0.74%. FTSE-100, CAC-40 and DAX dropped by 0.91%, 0.72% and 0.22% respectively.
Earlier, Japanese Prime Minister Naoto Kan said relevant ministers would meet on Friday to discuss economic steps and added that Japan’s economy was in a difficult condition, hurt by a recent rise in the yen. However, unnamed source said joint central bank intervention to stem the rise of the yen was not likely.
President of Suzuki said that he was seriously concerned by the upward trend in yen and called for swift action from Japanese authorities. He added, the company had lost about 500 billion yen in revenue compared with 2 years ago as a result of forex losses. He said ‘I hope the government will hear our cries of desperation.’
In other news, BOJ Governor Shirakawa has left Japan to attend the Kansas City Federal Reserve conference on Friday in Jackson Hole, Wyoming. Some traders speculated Shirakawa is likely to speak to Fed’s Chairman Bernanke and other central bankers during the conference to discuss possible currency intervention.
The single currency ratcheted higher in Asia due to cross buying in euro versus yen, the British pound and the Swiss franc, and rose briefly to 1.2747 in European morning partly due to the release of slightly stronger-than-expected German Gfk consumer confidence data. Later, although euro retreated from there to 1.2666, renewed buying interest pushed euro higher again and the pair climbed to an intra-day high of 1.2765 in NY due to the initial rise in global stock markets. Euro also drew support from Spanish Economy Minister Elena Salgado’s comments.
German Gfk consumer confidence data came in at 4.1, versus the economists’ forecast of 4.0 and the previous reading of 3.9 in August.
Spanish Economy Minister Elena Salgado said that a court ruling declaring invalid sales tax revenue over a three-year period would not affect public accounts.
The British pound edged higher from 1.5467 and jumped to 1.5590 on cross buying in sterling after triggering large stops above 1.5495/00 in European morning. Later, despite cable’s retreat to 1.5506 at NY opening, sterling rebounded strongly from there and rose to 1.5599 in tandem with euro before retreating.
On data front, the Chicago Federal Reserve Bank said its Midwest manufacturing index rose to 81.4 in July from 79.6 in June.
Economic data to be released on Friday include: Japan Household spending, National CPI, Tokyo CPI , National CPI (core), Unemployment rate, Germany Import price, HICP prelim, CPI prelim, U.K. GDP, Swiss KOF indicator, U.S. GDP annualised, GDP deflator, Personal consumption, PCE core, University of Michigan survey Final.