Market Review – 15/08/2011 22:00 GMT
Euro rallies on risk appetites and dollar’s broad-based weakness
The single currency rallied to a three-week high against the greenback Monday on risk appetite and dollar’s broad-based weakness as investors hoped that a meeting on Tuesday between French President Nicolas Sarkozy and German Chancellor Angela Merkel may result in further action to contain the region’s debt crisis.
The single currency ratcheted higher from 1.4261 to 1.4329 in European morning before retreating to 1.4264. However, euro rallied sharply to 1.4476 in NY morning due to return of risk appetite together with dollar’s broad-based weakness after release of weak U.S. data before stabilising. Active cross buying of euro vs yen and sterling also lifted the single currency as eur/jpy and eur/gbp rallied from 109.60 to 111.01 and from 0.8756 to 0.8829.
The U.S. Empire state manufacturing index for August came in at -7.72 compared to a forecast of 0.80 and previous figure of -3.76. U.S. Net purchases of long-term securities fell to $3.7 billion in June from a revised $24.2 billion in May.
Euro was also supported by the rally in U.S. equities as DJI surged by 1.90% or 213.88 points and closed the day at 11482.90.
The single currency was also encouraged by the ECB’s bond-buying last week as the ECB completed 22 billion euros of bond purchases under securities markets programme in week to Aug 12, which was the highest weekly settlement since it began buying EU government bonds from the market in May 2010.
Versus the Japanese yen, the greenback briefly climbed above the 77.00 level to a high of 77.09 on active cross selling of yen. However, price retreated sharply to 76.80 in Asian morning before staging a recovery to 76.97. Dollar later fell in NY morning on weak U.S. manufacturing data and extended a intra-day decline to 76.60 after the release of U.S. net purchases of long-term securities before recovering to 76.88 in NY afternoon.
The British pound traded sideways around 1.6280 in Asia and fell briefly to 1.6257 in European morning. However, cable rallied sharply to 1.6410 in tandem with euro in NY morning before trading sideways in NY afternoon.
Data to be released on Tuesday include:
Australia RBA meeting minutes, Germany GDP Q2, U.K. CPI, RPI, DCLG, EU GDP Q2, trade balance, U.S. building permits, housing starts, export price index, import price index, capacity utilisation, industrial production.