Market Review – 14/09/2010 22:50 GMTDollar falls to a fresh 15-year low against yen
The greenback tumbled against other major currencies on Tuesday on speculation that the U.S. Fed might announce another round of Treasury purchase program, which prompted investors to sell dollar aggressively. The Japanese yen also rose against the greenback after Japan’s prime minister won the DPJ’s presidential election.
The greenback dropped from 83.76 against the Japanese yen in Asia and penetrated last Wednesday’s 15-year low of 83.34 to 83.25 on active sales by model funds. The greenback weakened to 83.07 in European morning, as the news reported that Japanese Prime Minister Kan won the ruling party leadership vote against his challenger Ozawa and remained as Prime Minister. Ozawa had been more strident in his calls to intervene to weaken yen and yen rose after the voting results. Despite dollar’s brief recovery to 83.47 after the release of stronger-than-expected U.S. retail sales, the greenback dropped again to a fresh 15-year low of 82.92 in NY on dollar’s broad-based weakness, as the Wall Street Journal quoted from the economists at Goldman Sachs saying that U.S. Fed would announce a program of asset purchases to support a weak economy as early as November.
U.S. retail sales rose by 0.4% m/m versus the expectations of 0.3% whilst the retail sales excluding auto rose by 0.6% versus the expectations of 0.3%.
In other news, Japanese Finance Minister Noda said ‘will take decisive steps on forex, including intervention; rapid, prolonged yen rise bad for economy.’
The single currency edged higher after Monday’s rally to 1.2893 and penetrated said 1.2893 to 1.2910 on dollar’s broad-based weakness in European morning, the pair tumbled from there to 1.2828 after the release of weaker-than-expected German ZEW index. However, euro rebounded after the release of stronger-than-expected U.S. retail sales and rallied to 1.3034 in NY on dollar’s broad-based weakness before stabilising.
German investor confidence dropped to a 20-month low in September. The German ZEW index fell to minus 4.3 from 14 in August. That was the fifth monthly decline and the lowest since February 2009.
Earlier, Germany’s Finance Minister Schaeuble said net new borrowing this year would be somewhere between 50 billion and 60 billion euros. Schaeuble said ‘we will not have growth of above 3% next year.’
Although the British pound fell in Australia due to the dramatic fall in U.K. RICS August house price (U.K. RICS tumbled to -32%, the lowest since May 2009, from -8% in July and the expectations of -12%) and dropped to an intra-day low of 1.5348 on active cross selling in sterling, cable staged a rebound to 1.5442 after the release of higher-than-expected U.K. CPI data before retreating due to BOE’s Weale’s testimony. Later, cable rallied in tandem with euro on dollar’s broad-based weakness and climbed to 1.5588 in NY before stabilising.
U.K. CPI rose by 0.5% m/m and 3.1% y/y versus the economists’ expectation of 0.3% m/m and 2.9% y/y rise, suggesting U.K. might need to raise interest rate later as the data exceeded the BOE’s inflation target at 3.0% y/y.
Bank of England policymaker Martin Weale said U.K. had become more competitive due to weak sterling. Weale added that MPC could consider further stimulus if economy was much weaker than forecast.
The Swiss franc surged against the greenback on Tuesday on speculation that SNB would raise interest rate earlier than other central banks. Usd/chf tumbled from 1.0088 to 0.9933 and it was the first time dropping to parity since December 2009.
In addition, spot gold also rose to a fresh record high of 1273.80.
Economic data to be released on Wednesday include:
Australia W’pac consumer confi., U.K. Avg. earnings 3m, Claimant count, ILO unemployment rate, Swiss ZEW index, EU Employment, HICP final, CPI core, U.S. Import price index, Export price, Empire state mfg, Capacity utilisation, Industrial prod’n.