Market Review – 01/09/2010 22:48 GMTDollar falls as solid economic data eases growth worries
The greenback fell against euro and the British pound as solid economic data eased worries over the global economic growth, boosting investors’ risk appetites.
The greenback rose initially against the Japanese yen and climbed to 84.58 on short-covering due to cross-unwinding in yen after the release of upbeat economic data from China and Australia (Chinese PMI in Aug came in at 51.7 versus the forecast of 51.5 while Australia’s GDP came in at 1.2% q/q and 3.3% y/y versus the expectations of 0.9% q/q and 2.9% y/y respectively) but the pair fell from there and hit an intra-day low of 83.66 after the release of worse-than-expected U.S. ADP employment data which decreased by 10,000 jobs in August against the economists’ forecast of 20,000 jobs added, however, buying interest at there lifted the pair again and greenback rallied to 84.67 in NY due to the release of much stronger-than-expected U.S. ISM manufacturing data before moving sideways.
U.S. ISM manufacturing data for August came in at 56.3 versus the expectations of 53.0 and the previous reading of 55.5 in July.
Earlier in Asia, Japanese ruling party’s Ozawa said ‘BOJ would implement policies including forex intervention to cope with rapid yen rise’ and Japanese Prime Minister Kan’s policy statement said ‘to boost jobs to help revitalise economy.’
The single currency rose strongly from 1.2663 in Asia on short-covering due to the supportive comments from Spanish Prime Minister Zapatero following Tuesday’s retreat from 1.2744 to 1.2661 and eur/usd rallied to 1.2856 in NY due to cross buying in euro (eur/gbp jumped from 0.8250 and touched an intra-day high of 0.8328, while eur/jpy and eur/chf rose from 106.60 to 108.62 and 1.2870 to 1.3041 respectively). Investors’ risk appetites also returned on strength in U.S. and European equity markets.
Spanish Prime Minister Zapatero said debt auctions showed Spanish Government was able to meet its financing needs as Spain implemented austerity measures to lower deficit. He wanted China to buy more Spanish bonds and praised China’s increase in Spanish bonds this year.
U.S. and European equities rallied on Wednesday, as DJI jumped 2.54% or 255 points and closed the day at 10269, while FTSE-100, CAC-40 and DAX surged by 2.70%, 3.81% and 2.68% respectively.
The British pound edged higher from 1.5337 in Asia on short-covering after Tuesday’s selloff to 1.5327 in part due to the rally in U.K. government bonds, which had their strongest month in almost 2 years, and sterling rose to 1.5417 in Europe. Later, despite cable’s brief but sharp retreat from there due to the release of weaker-than-expected U.K. PMI, renewed buying interest emerged at around 1.5337 and gbp/usd rallied in tandem with euro and touched an intra-day high of 1.5492 in NY before stabilising.
UK Aug Manufacturing PMI came in at 54.3, the lowest since November, against the economists’ forecast of 57.0 and the previous reading of 57.3 in July was revised to 56.9. Growth in Britain’s manufacturing sector slowed more than expected last month, led by the weakest expansion in new orders for more than a year.
The Australian dollar rallied from 0.8913 to 0.9117, as upbeat Australian GDP data suggested the central bank could lift interest rates in the future.
Economic data to be released on Thursday include: Australia Trade balance (aud), Swiss GDP, Retail sales, U.K. Nationwide hse price, Halifax hse prices, PMI construction, EU GDP Rev., PPI, ECB rate decision, U.S. Jobless claims, Labour cost, Productivity, Durable goods (rev.), ex. Defense (rev.), ex. Transport (rev.), Factory orders, Pending home sales.