Market Review – 11/09/2010 02:04 GMTDollar rose against yen due to upbeat Chinese import data
The greenback advanced against the Japanese yen on Friday as solid Chinese import data boosted investors’ confidence on the global economic recovery.
Although the greenback rose initially to 84.30 against the Japanese yen in early morning trading in Tokyo on short-covering in reaction to the Japanese government statement that decisive measures would be taken, including forex intervention if necessary together with a widening in the U.S.- Japan yield spread, selling interest there pressured dollar to 83.75 in Europe. However, the greenback staged a strong rebound from there and climbed to 84.39 in NY before trading narrowly.
The greenback was supported by the increase in Chinese import, as the figure in August rose by 35.2%, versus the expectations of an increase of 26.1% and 22.7% in July. The data boosted investor’s confidence as China may lead the global economic recovery.
In addition, Japanese Prime Minister Naoto Kan said in a debate with powerbroker Ichiro Ozawa that the government would take firm steps as needed to stop the Japanese yen’s rise but added that joint intervention in currency markets was difficult. Earlier in Asia, Japanese Prime Minister Kan unveiled a 915 billion yen ($11 billion) economic package (50% of it would be used to stimulate consumer spending) to prop up the economy.
Despite euro’s steep fall to an intra-day low of 1.2642 initially in Asia on renewed risk aversions due to a rise in U.S. Treasury yields, the single currency staged a strong rebound on short-covering and climbed to 1.2747 in Europe. However, the single currency fell to 1.2687 on concerns over banks ahead of a meeting to finalise European capital rules and a series of Chinese data over the weekend. The single currency later dropped again after recovery and sank to 1.2675 near NY closing, as IMF said to approve immediate disbursement of 2.57 billion euros for Greece and said Greece was ahead of schedule in making economic reforms.
China will release CPI, PPI, industrial output and retail sales data for August at 2:00GMT on Saturday.
In other news, the German banking association said the Basel Committee would probably require banks to have a Tier 1 capital ratio of 6% up from 4% and expected Germany’s 10 biggest banks could need 105 billion euros of additional capital under the revamp of the banking rules.
The British pound fell initially in tandem with euro in Asia and sank to 1.5365 in European morning. Later, although cable rebounded strongly from there to 1.5468, renewed selling interest at there sent cable lower and cable tumbled to 1.5345 in NY afternoon due to cross selling in sterling especially versus euro, as eur/gbp rallied from 0.8214 to 0.8289.
On data front, U.K. core PPI in August rose by 0.1% m/m and 4.6% y/y as expected, versus the readings of 0.2% and 4.7% in July.
Economic data to be released next week include:
Germany WPI, Swiss Combined PPI, EU Industrial prod’n, EC’s Interim Econ. Forecast, U.S. Fed budget on Monday, New Zealand Retail sales, Australia NAB business confidence, Japan Capacity utilisation, Industrial prod’n, U.K. N’wide Consumer Confi., RICS house prices, DCLG house prices, CPI, CPI core, RPI, RPI – X, Germany ZEW index, EU Labour cost, ZEW survey, U.S. Retail sales, Retail sales less auto, Business inventories, Canada Capacity utilisation on Tuesday, U.K. N’wide Consumer Confi., Australia W’pac consumer confi., U.K. Avg. earnings 3m, Claimant count, ILO unemployment rate, Swiss ZEW index, EU Employment , HICP final, CPI est., U.S. Import price, Import price index, Export price, Empire state mfg, Capacity utilisation, Industrial prod’n on Wednesday, New Zealand RBNZ rate decision, Japan Tertiary industry index, Swiss Industrial prod’n, SNB rate decision, U.K. Retail sales, BOE’s Inflation Survey, EU Trade balance (euro), U.S. Current account (usd), Jobless claims, PPI, PPI core, Foreign treasury buys, Net LT TIC flows, Philadelphia Fed survey on Thursday, Germany PPI, EU Current account (euro), U.S. CPI, CPI core, Real earnings, U. Michigan survey Prel. on Friday.