Market Review – 05/08/2010 22:45 GMTDollar weakens against the yen on weak U.S. jobs dataDollar fell against the Japanese yen on Thursday, as disappointing U.S. jobs data added concerns over the speed of U.S. economic recovery.
Despite dollar’s brief rise to 86.46 against the Japanese yen, the greenback fell from said intra-day high on heavy selling and risk aversion activities of yen buying as N.Z. posted higher-than-expected unemployment rate (actual Q2 6.8% versus forecast of 6.2%), the pair retreated to 86.01 in Asian mid-day before staging a recovery on short-covering, however, usd/jpy dropped again and penetrated below 86.00 after the release of worse-than-expected U.S. jobs data and eventually hit an intra-day low of 85.71 in NY afternoon.
U.S. weekly jobless claims data unexpectedly rose to 479,000 versus the forecast of 455,000, the increase was the highest in 3 months, suggesting U.S. employers were still in staff reduction mode as recent economic recovery was slowing down.
In other news, Japanese Prime Minister Kan said at a parliamentary meeting in Tokyo morning that he was closely watching the economy’s performance to determine whether a fresh response is needed. Japan’s trade minister Masayuki Naoshima said that he was worried about a recent rise in yen as Japanese companies would face currency risks and added ‘we need to take some form of response.’
Although the single currency traded narrowly in Asia after Wednesday’s selloff to 1.3131 and the pair briefly dropped to an intra-day low of 1.3119 in European morning on Thursday, euro then rebounded strongly from there on speculation for potential surprise extension of liquidity provision at ECB’s press conference together with the release of much stronger-than-expected German industrial orders, which rose by 3.2% in June versus the economists’ forecast of 1.5% rise. Later, despite euro’s rally to an intra-day high of 1.3236 after the release of worse-than-expected U.S. jobless data, the single currency then fell sharply to 1.3135 before recovering.
The single currency was supported by the positive comments from ECB president Jean-Claude Trichet earlier, as he said after ECB kept its interest rate unchanged that incoming economic data for Q3 showed stronger-than-expected eurozone growth. He indicated that ‘the stress-testing exercise was comprehensive and rigorous and the results confirm the resilience of EU and eurozone banking systems as a whole to severe economic and financial shocks’.
ECB kept benchmark interest rate unchanged at a record low of 1.0% as expected. ECB also kept its overnight deposit rate, which acts as a floor for money markets, at 0.25% and left its marginal lending rate at 1.75%.
The British pound moved sideways in Asia after the previous session’s strong retreat to 1.5857 before falling to 1.5820 in European morning. Although sterling rebounded strongly from there and touched 1.5925, cable retreated swiftly after the announcement of BoE rate decision and asset purchase target and eventually dropped to 1.5824 in NY morning before recovering.
The Bank of England kept interest rates unchanged at a record low of 0.5% as widely expected and announced no new quantitative easing purchases.
The closely watched US non-farm payrolls data would be released on Friday.
Economic data to be released on Friday include: Australia RBA Monetary Policy Statement, Japan Leading indicators, Swiss Unemployment rate, U.K. Industrial prod’n, Manufacturing prod’n, PPI input, PPI output, PPI core, Germany Industrial, Canada Unemployment rate, Net Change in Employment, Canada Ivey PMI, U.S. Unemployment rate, Avg. hourly earnings .
