Market Review – 30/12/2010 21:40 GMT
Dollar rebounds from 7-week low against yen on upbeat US economic data
The dollar recovered from a fresh 7-week low against the Japanese yen on Thursday as U.S. initial jobless claims fell more than expected and Chicago PMI index also rose to the highest in two decades. The series of robust US economic data suggested the US economy was gaining upward momentum, lifting the Treasury bond yields.
The greenback initially fell to 81.28 against the Japanese yen in Asian morning, however, the pair recovered from there on short-covering. Dollar later rebounded to 81.86 in NY session, supported by the release of a series of upbeat US economic data.
U.S. Chicago PMI came in at 68.6 in Dec, much stronger than the forecast of 61.0 and the index was the highest since 1988. US pending home sales rose by 3.5% m/m in Nov versus the forecast of +0.8% m/m on Bloomberg. U.S. weekly jobless claims was 388k vs forecast of 415k and the data was the lowest since July of 2008. Treasury yields rose later as traders interpreted the labour market was improving.
Euro maintained a firm undertone on Thursday as price was supported by the early release of strong Italian business confidence on Reuters. Dec index climbed to 103 vs forecast of 101.6. The index showed business sentiment in Italy’s manufacturing sector rose to its highest level in nearly 3 years in December. Euro continued to edge higher to 1.3315 but eased later as dollar rebounded after the release of strong US economic data.
The British pound initially rose to 1.5535 but price tanked from there and eventually tumbled to 1.5367 in NY session before staging a minor recovery. Cross-selling in pound pressured cable as eur/gbp rose from 0.8520 to 0.8634. Traders sold pound aggressively as the Land Registry said house prices dropped by 0.6% m/m in November while a Bloomberg survey showed house prices would fall further in 2011.
The Swiss franc hit record highs against the euro and dollar as traders bought the Swiss currency as safe-haven asset. The Swiss franc rose to 0.9350 against the greenback and 1.2398 against euro.
Friday would be holiday for the German, Japanese and Swiss markets.
Economic indicators to be released on Friday include:
UK Nationwide house prices.