Market Review - 04/06/2013 22:42GMT

Dollar rises against yen on improved risk appetite


The greenback strengthened against the Japanese yen on Tuesday on improved risk appetite as Japan's Nikkei-225 index staged a strong rebound after the recent selloff.

Versus the Japanese yen, although the greenback retreated briefly after early strong rebound from Monday's low at 98.86 to 99.86 in Asian morning, renewed buying emerged at 99.34 and price then rose to 100.42 in European morning due to the rally in Japan's Nikkei-225 index (up by 271 points) before easing to 99.86. Later, despite brief rise to 100.38 in New York morning, said 100.42 resistance capped dollar's upside and price traded narrowly in U.S. afternoon.

Despite euro's retreat from Monday's top at 1.3108 to 1.3050 in European morning, active cross buying of euro versus sterling lifted the pair to 1.3102 in New York morning, however, offers below said 1.3108 resistance capped euro's upside and price dropped to 1.3042 and then traded inside this range in U.S. afternoon.

The British pound edged lower from Asian high at 1.5343 to 1.5283 in European morning due to cross selling of sterling versus euro. Price eventually hit a session low of 1.5273 in New York morning before stabilising.

Earlier in Europe, the pound was supported after the release of better-than-expected U.K. May construction PMI, which came in at 50.8, better than the expectation of 49.6.

The Reserve Bank of Australia decided to leave the cash rate unchanged at 2.75% as widely expected. RBA said 'some scope for further easing; easier financial conditions should strengthen growth over time; A$ remains high considering decline in export prices, despite recent depreciation.'

In other news, IMF's Lagarde said 'Greek program on right track; up to EU to decide on Greek debt relief; Greek unemployment a major concern; Greece has made progress on many fronts; more Greek market reforms needed.' Fed's George said 'supports slow pace of asset purchases, notes this would not constitute policy tightening; adjustments today can take a measured pace as the economy's progress unfolds; waiting too long to exit from ultra-easy Fed policies carries no less risk than tightening too soon; U.S. job growth in past 6 months more than enough to keep up with population growth, reduce employment.'

On the data front, eurozone PPI in April came in at -0.6% m/m and -0.2% y/y, lower than the forecast of -0.3% n 0.2% respectively. U.S. trade deficit in April was released at $40.3 billion, versus the forecast of -41.0B.

Data to be released on Wednesday:

Australia GDP, China HSBC services PMI, Italy services PMI, France services PMI, Germany services PMI, EU services PMI, GDP, retail sales, UK BRC shop price index, services PMI, Canada building permits, U.S. labour costs, ADP employment, durable goods, ex. defense, ex. transport, factory orders and ISM non-manufacturing .