Thread: Daily FX Market Review by Acetrader

Market Review - 30/08/2010 22:46 GMT

The Japanese yen rises broadly as BOJ's easing move disappoints investors

The Japanese yen strengthened against major currencies on Monday, as investors worried that BOJ's easing measures are not aggressive enough to weaken the yen's gain.

Although the greenback rose initially against the Japanese yen as the news reported that BOJ would hold an extraordinary emergency meeting and the pair climbed to an intra-day high of 85.91 in Asian morning, dollar tumbled from there after the results of BOJ's emergency meeting and extended its weakness to 84.55 in Europe following the comments from BOJ's Shirakawa. Later, despite the greenback's recovery to 84.82 on short-covering, renewed selling interest emerged at there and dollar fell again to 84.50 in late NY trading session.

The greenback was pressured by cross buying in yen, as eur/jpy, aud/jpy and gbp/jpy tumbled from 109.56 to 107.02, 77.51 to 75.41 and 133.67 to 130.67 respectively.

The Bank of Japan released the results of the emergency meeting and stated that the central bank kept interest rate unchanged at 0.1% and the policy board decision on call rate was unanimous. BOJ said the volume of funds offered in fixed-rate market operation was raised to 30 trillion yen from 20 trillion yen. The central bank kept economic assessment unchanged and economy showed further signs of moderate recovery, likely on recovery trend, and it would be important to pull Japan out of deflation. BOJ added that it needed to pay more attention to downside risk while forex and stock market have recently been unstable. There would be uncertainty about future, especially for US economy. The results of the meeting disappointed investors as the measures were just an extension of the existing plans.

BOJ's Shirakawa said downside risk for Japanese economy was increasing and current amount of JGB was appropriate. Shirakawa indicated policy steps would not be bound by yen and stock moves, and current yen rise was due to investors' risk aversion. He added forex, stock markets were unstable and there was no big gap in view of economy with government. Shirakawa expects emerging economies to continue strong expansion.

U.S. stocks fell sharply on Monday, as DJI closed the day down by 141 points or 1.39% at 10010. S&P-500 and Nasdaq sank by 1.47% and 1.56% respectively. U.K. market was off on Monday for British summer bank holiday.

In other news, U.S. President Barack Obama said that he and his economic team discussed additional steps to promote economic growth, including extending tax cuts for middle class and businesses, rebuilding infrastructure and investing in clean energy research and development.

Earlier, the greenback was initially supported by the firmness in Nikkei-225, as it closed the day above 9000 at 9149, up by 1.76% or 158 points.

Despite the single currency's early rise to 1.2775 on cross-buying in euro in Australia, profit-taking offers pressured the single currency and euro ratcheted lower from there and remained under pressure throughout the day. The single currency eventually hit an intra-day low of 1.2659 in late NY trading session.

Eurozone business climate came in at 0.6 versus the expectations of 0.7 whilst consumer sentiment in August was -11 against the economists' forecast of -12.

Although the British pound strengthened in Asia and rose above last Friday's high of 1.5543 to 1.5558 partly due to cross-buying of sterling versus yen and euro together with the rise in Asian bourses, cable retreated from there to 1.5510 on profit-taking. Later, despite sterling's strong rebound to an intra-day high of 1.5577, cable retreated from there and tumbled to an intra-day low of 1.5456 in NY afternoon.

Economic data to be released on Tuesday include: U.K. Gfk survey, Japan Manufacturing PMI, Industrial prod'n, Retail sales, Construction orders, Housing starts, Australia Current account, Retail sales, Germany Unemployment rate, Unemployment change, EU HICP final, Unemployment rate, Canada GDP, U.S. Chicago PMI, Consumer confidence, FOMC meeting minutes.

Market Review - 31/08/2010 22:03 GMT

Dollar falls against the yen on worries over US economic recovery

The greenback dropped against the Japanese yen on Tuesday, as minutes from U.S. Fed policy meeting on August 10 showed the officials worried about the growth of U.S. economy.

Although the greenback remained under pressure versus the Japanese yen in Asia and fell from 84.66 to 84.06 due to cross buying in yen together with the weakness in Asian equities (Nikkei-225 tumbled by 3.55%), dollar staged a rebound to 84.55 on short-covering in Europe. Dollar rose further to 84.61 after the release of U.S. consumer confidence data, which came in at 53.5, much stronger than the economists' forecast of 50.5, however, the greenback tumbled from there and reached an intra-day low of 83.83 after the release of U.S. Federal Reserve meeting minutes.

U.S. Fed released minutes of its FOMC meeting on Aug 10 and it stated that the committee would need to consider steps it could take to provide additional policy stimulus if the economic outlook would weaken appreciably further. Members generally believed that outlook would be softer than expected and saw growing downside risks to growth and inflation. The minutes pressured the greenback as some officials were concerned over the U.S. economy.

Earlier in Asia, Japanese Finance Minister Noda said that 'he would take decisive steps on currencies when needed.' He added 'current moves in currencies are one-sided' and he believed government and BOJ policy steps would have an effect from now on.

The Nikkei reported Monday's BOJ's additional monetary easing drew mixed reactions from business leaders. Nobuyuki Nakahara, former central bank policy board member said BOJ's decision to expand a bank-loan program was 'too little and too late as a means of halting the yen's advance.' Japanese MOF's Ikeda suggested BOJ should adopt inflation targeting and would take decisive steps against rapid currencies moves.

Although the single currency weakened in Asia on renewed risk aversions together with cross selling of euro versus yen and the Swiss franc (eur/chf tumbled to a fresh record low of 1.2850) and fell to an intra-day low of 1.2625, euro rebounded from there on short-covering and cross buying in euro after the release of better-than-expected German jobs data, as German unemployment change for August was -17,000 versus the economists' forecast of -20,000 and German unemployment rate remained unchanged at 7.6% as expected. Later, despite euro's sharp rise to 1.2744 in NY, euro fell sharply from there in NY afternoon after the release of U.S. Fed minutes and before staging a recovery.

On economic front, European Union statistics office Eurostat said inflation in the 16-nation currency area fell to 1.6% y/y in August from 1.7% y/y in July. Eurozone unemployment came in at 10.0% as widely expected.

The British pound traded narrowly in Asia after Monday's selloff from 1.5577 to 1.5456. Later, the pair fell from the Asian high of 1.5475 and reached 1.5395 in Europe on dollar's strength against European currencies together with concerns over U.K. housing as the reports from Financial Times showed that the National House Federation estimated tens of thousands of UK homeowners faced at least 4 more years of negative equity. Later, cable dropped again after recovery and tumbled to an intra-day low of 1.5327 in NY.

In addition, European stock markets (DAX, FTSE-100 and CAC-40 pared all of their early losses and closed the day up by 0.45%, 0.11% and 0.22% respectively.

In other news, UK Telegraph reported the British Chamber of Commerce (BCC) said recent weakness in sterling helped British manufacturing sector chalk up its strongest performance against UK services in recent memory. Manufacturing has been doing better than services for the last 3 quarters and the BCC's chief economist David Kern added 'the exchange rate effect has been powerful.'

Economic data to be released on Wednesday include: Australia GDP , Swiss PMI, Germany Retail sales, Manufacturing PMI, EU PMI manufacturing, U.K. PMI manufacturing, Halifax hse prices, U.S. ADP employment, ISM manufacturing, Construction spending.

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Market Review - 02/09/2010 22:47 GMT

Euro rises due to solid European bond auctions ahead of U.S. non-farm payrolls

The single currency strengthened against the greenback on Thursday, as solid results from Spanish and French bond auctions boosted risk appetite and gave support to euro, however, investors remained cautious ahead of the release of US non-farm payrolls.

Although the single currency moved sideways on Thursday after Wednesday's rally from 1.2663 to 1.2856 and edged lower to an intra-day low of 1.2776 in Europe, euro rebounded from there and rose to 1.2838. Later, despite euro's brief fall to 1.2795 after the comments from ECB's Trichet, the pair staged a strong rebound and climbed to 1.2848 in NY before trading narrowly.

The single currency was supported by solid demand from Spanish and French bond auctions, as France and Spain sold a combined 12.2 billion euros of government bonds, with strong demand for longer-dated paper as investors were eager for higher-yield in the low growth environment.

ECB President Trichet said current ECB interest rates were appropriate and expected eurozone economy to grow at a moderate and uneven pace, and price developments to remain moderate over medium term horizon. Trichet said ECB would extend full allotments at all liquidity operations. He added downside risks included renewed financial market tensions, higher oil and commodity prices whilst upside risks included stronger global economy and tax increases.

Earlier, The European Central Bank kept interest rates at a record low of 1% as widely expected. In addition, eurozone GDP rose by 1.0% q/q and 1.9% y/y versus the downwardly revised 0.3% q/q and 0.8% y/y whilst PPI rose by 0.2% m/m and 4.0% y/y versus the readings of 0.3% m/m and 3.0% y/y in June.

Although the greenback fell from 84.55 in Asia on cross buying in yen after the release of smaller-than-expected Australian trade surplus (Australian trade surplus shrank to A$1.89 billion in July from a revised A$3.44 billion in June) and dropped to 84.00 in Europe, dollar pared its losses and rose to 84.46 after the release of U.S. job and pending home sales data. Dollar then retreated from there on renewed selling before trading sideways.

U.S. weekly jobless claims fell to 472,000 (the economists' forecast was 475,000) from upwardly revised 478,000 prior week. U.S. labor cost rose by 1.1% versus the forecast of a rise of 1.2% whilst productivity fell by 1.8% versus the expectations of a decrease of 1.9%. U.S. pending home sales index rose unexpectedly by 5.2% to 79.4 in July, suggesting a tax credit-related housing market decline was close to bottoming.

In addition, U.S. Fed Chairman Bernanke testified on Thursday and said that tough government follow-through on a freshly minted U.S. financial law would be crucial to ensure that no bank or firm grew so large that its collapse could jeopardize the entire economy.

In other news, Sandra Pianalto, President of the Federal Reserve Bank of Cleveland, said 'the U.S. Federal Reserve feels a great sense of urgency in getting the housing market back on its feet and a healthy housing sector is critical both to the overall economy and to a sustainable economic recovery'.

The British pound edged lower in Asia on profit-taking after Wednesday's rise from 1.5337 to 1.5492 and fell to 1.5373 in Europe on cross selling in sterling versus euro (eur/gbp surged from 0.8283 to 0.8348) after the release of weaker-than-expected U.K. housing data. Later, despite cable's brief recovery to 1.5417, renewed selling interest at there sent sterling lower and it dropped to 1.5350 in NY before staging a recovery.

U.K. Nationwide house price dropped by 0.9%, weaker than the economists' forecast of a decrease of 0.2%, whilst construction PMI came in at 52.1 versus the expectations of 53.2.

The market is focusing on U.S. non-farm payrolls which will be released at 12:30GMT on Friday, with expectations of falling in third straight month.

Economic data to be released on Friday include: Japan Business capex, Swiss CPI, Germany PMI service, EU PMI service, U.K. Services PMI, EU Retail sales, U.S. Unemployment rate, Avg. hourly earnings, ISM non-manufacturing.

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Market Review - 03/09/2010 21:50 GMT

Dollar falls broadly as better-than-expected U.S. jobs data boosts risk appetite

The greenback dropped against most major currencies on Friday as better-than-expected U.S. non-farm payrolls eased recent worries on U.S. economic recovery and boosted demand for risky assets and higher-yielding currencies such as the Australian dollar.

Although the greenback traded narrowly against the Japanese yen in Asia and European morning, the pair jumped to 85.23 immediately after release of better-than-expected key U.S. jobs data. However, dollar retreated from there on profit-taking together with cross buying in yen versus other European currencies and later fell sharply to 84.23 after the release of much weaker-than-expected U.S. ISM manufacturing and then traded narrowly in NY afternoon.

U.S non-farm payrolls in August showed a drop of 54K jobs versus the forecast of -100K. However, private sector posted a surprise increase of 67K versus the forecast of +41K, suggesting employers were beginning to hire more people even during the summer month, allaying recent market concern that the world's largest economy may be moving back into recession and boosted appetite for risky assets such as commodity currencies i.e Australian dollar, New Zealand dollar and Canadian dollar .

U.S. ISM manufacturing PMI data came in at 51.5, versus the economists' forecast of 53.5 and the previous reading of 54.3 in July.

Earlier in Tokyo trading, Ichiro Ozawa, who is challenging Japanese Prime Minister Naoto Kan in DPJ's presidential election, said on a TV Asahi program that intervention in currency markets to stem the yen's appreciation was a possibility. He also added Japan could also use the strong yen to secure resources globally.

The single currency moved narrowly in Asia and price rebounded from 1.2808 to 1.2854 in Europe on slightly stronger-than-expected eurozone services PMI, which came in at 55.9 versus the expectations of 55.6. Later, despite euro's brief drop to 1.2814 after the release of U.S. jobs data, buying interest quickly emerged and euro rose to an intra-day high of 1.2898 in NY afternoon due to rally in U.S. stocks together with active cross buying in euro.

On data front, eurozone retail sales rose by 0.1% m/m and 1.1% y/y, versus the expectations of 0.2% and 0.6% respectively.

The British pound edged higher in Asia after Thursday's selloff to 1.5350 and climbed to 1.5452 in London morning. Despite intra-day brief but sharp fall to 1.5392 after the release of much weaker-than-expected U.K. Services PMI (U.K. CIPS services PMI came in at 51.3, much weaker than economists' forecast of 52.9), sterling rebounded strongly in tandem with eur/usd shortly after the U.S. jobs data and rose to as high as 1.5469 ahead of NY closing.

The commodity currencies rose strongly on Friday, as the Australian dollar and the New Zealand dollar rallied from 0.9066 to 0.9176 and 0.7132 to 0.7220. Usd/cad tumbled from 1.0569 to 1.0381.

In the global equity market, DJI rallied on Friday and closed the day at 10448, up by 128 points or 1.24%. FTSE-100, CAC-40 and DAX surged by 1.14%, 1.06% and 1.12% respectively. U.S. markets will be closed for the Labor Day holiday.

Economic data to be released next week include:

Japan BoJ 2-day meeting (U.S. and Canada are closed for holiday) on Monday, U.K. BRC retail sales, Australia RBA rate decision, Japan Leading indicators, BOJ rate decision, Swiss Jobless rate, Germany Factory orders on Tuesday, Japan Trade balance (jpy), Current account, Machine orders, Economic watch DI, Germany Trade balance (euro), Export, Import, Industrial prod'n, U.K. BRC shop price index, Industrial prod'n , Manufacturing prod'n, Canada Building permits, BOC rate decision, Ivey PMI, U.S. Fed's Beige Book on Wednesday, Australia Employment change , Unemployment rate, Japan Consumer confidence, Germany CPI final, HICP final, U.K. Trade balance (gbp), BOE rate decision, BOE Asset Purchase Target, U.S. Trade balance (usd), Jobless claims, Canada Housing starts, Trade balance (cad), Exports, Imports, New housing price index on Thursday, Japan Domestic CGPI, GDP Rev. , U.K. PPI core, PPI input, PPI output, Canada Unemployment rate, Jobs-change, U.S. Wholesale inventories on Friday.

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Market Review - 06/09/2010 17:38 GMT

Euro rises to 3-week high of 1.2920 before retreating on profit-taking

The single currency extended last Friday's rally to a 3-week high of 1.2920 before retreating to 1.2867 on profit-taking as European finance ministers gathered on Monday in Brussels for several days this week and they studied ways to charge a levy on banks and a tax on financial transactions plus other issues not relating to the forex market. The German Banking Association said the 10 biggest German banks may need 105 billion euros (US$ 140.9 billion) of additional capital under new banking rules dubbed Basel III as the Basel Committee will likely require banks to have a Tier 1 capital ratio of 6%. In other news, Spain's labour minister, Celestino Corbacho said in a national radio that 'Spain's unemployment levels will take 3-4 years to recover to pre-crisis levels unless something untoward happens.'


IMF's chief economist Olivier Blanchard said in a newspaper that 'growth will likely remain weak both in Europe & U.S.; European government must present credible, medium-term fiscal consolidation plans and U.S. slowdown would have significant but not enormous impact on Asia and currency appreciation is one but only one part of China's shift in economy structure.' His view echoed that of the G20 deputy finance ministers' weekend meeting in S. Korea, John Lipsky, IMF's first deputy managing director, said to reporters 'They (deputy FINMINs) are mainly confident that there is a moderate recovery underway globally. He said 'the world economy is recovering moderately but still faces challenges such as the need for medium-term fiscal consolidation.'

Bank of Japan starts its 2-day rate meeting on Monday, following last week's emergency meeting. Japanese finance minister, Yoshihiko Noda said on Sat. that Tokyo would take decisive steps to stem the yen's rise when needed, while suggesting that coordinated currency market intervention was a difficult option. Over in DPJ's upcoming election news, Prime Minister Kan & Ozawa, his challenger at the Sept 14th DPJ's presidential election faced off each other again on Sunday at TV debates and exchanged their different views on how to pay for planned policies plus other key issues. According to Kyodo News, latest poll showed on Saturday that nearly 50% of local assembly members who can vote in the upcoming DPJ's leadership election favoured Kan. Banri Kaieda (an aide to DJP's kingpin Ichiro Ozawa) said that 'BOJ not doing enough but BOJ alone cannot end deflation; more JGB buying by BOJ is an issue open for debate; should not rule out option of solo forex intervention and fiscal reform targets needed but existing targets should be reviewed.' The greenback fell briefly versus the Japanese yen from 84.50 to 84.04 and then traded sideways in relatively thin European session due to U.S. Labor Day holiday.

UK Telegraph reported Reed Jobs Index showed a drop in the number of jobs available in August as compared with July. In addition, a separate survey also indicated 1 in 5 small and medium-sized businesses expected more job losses over the next year, suggesting confidence among British employers is waning. Despite extending last Friday's rise to 1.5490 in European morning, the British pound tumbled to a session low of 1.5345 on talk of big demand for eur/gbp, which rose from 0.8329 to 0.8390, by a U.K. clearer.

Tuesday will see the release of U.K. BRC retail sales, Australia RBA rate decision, Japan Leading indicators, BOJ rate decision, Swiss jobless rate and Germany factory orders. Investors are also waiting for the Obama's US$ 50 billion infrastructure plan this week aimed at generating some desperately needed U.S. job growth and limiting predicted Democratic losses in Nov. 2 congressional elections.

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Market Review - 07/09/2010 22:01 GMT

Yen surges to a fresh fifteen-year high against dollar after BOJ's Shirakawa's comments

The greenback fell sharply against the Japanese yen on Tuesday, as the Bank of Japan Governor Shirakawa's comments increased speculation that Japan was not ready to weaken the Japanese yen's strength and renewed concerns over eurozone banking system sparked off risk aversions to boost demand of yen and the Swiss franc.

The greenback dropped from 84.27 against the Japanese yen in Asia and penetrated 84.00 to 83.73 in part due to the comments from BOJ Governor Shirakawa, as he said 'BOJ won't react to short-term forex, stocks moves'. He said strong yen might prompt firms to hold off on CAPEX and monetary authorities could not control forex rates. Despite dollar's minor correction from there, the greenback then fell below previous 83.58 low to a fresh 15-year low of 83.51 in NY before recovering on profit-taking.

The greenback was pressured on risk aversions due to renewed concerns over eurozone banking system, as Wall Street Journal earlier reported that the recent European banks' stress test had understated some lenders' holdings of potentially risky sovereign debts, and the costs of insuring many banks and sovereign bonds against default in countries like Portugal, Ireland, Italy and Greece had jumped above their pre-stress-test levels.

Cross buying in yen also pressured the greenback, as eur/jpy, gbp/jpy and aud/jpy tanked from 108.39 to 106.26, 129.60 to 127.93 and 77.27 to 76.21 respectively.

Earlier in Asia, BOJ kept overnight call rate target unchanged at 0.1%. The central bank maintained economic assessment that the Japanese economy was showing further signs of moderate recovery and was likely heading for recovery trend but needed to watch downside economic risks.

DPJ's lawmaker Tsutomu Okubo said BOJ should abolish its self-imposed limit in buying long-term JGBs to enhance the central bank's ability to finance stimulus spending.

The single currency nose-dived from 1.2877 in Australia on active cross-selling in euro due to the early news from Wall Street Journal about eurozone banking system. Later, the single currency fell further to 1.2736 in Europe after the release of much weaker-than-expected German industrial orders. Euro eventually sank to 1.2677 ahead of NY closing on cross selling in euro especially versus the Swiss franc as eur/chf tumbled from 1.3025 to a fresh lifetime low of 1.2812.

German industrial orders dropped by 2.2% versus the economists' forecast of a rise of 0.5%.

Earlier, EU's Rehn said 'it is important to underline that while we have stabilised the situation in the spring and during the summer concerning financial stability in the euro area, we are certainly not out of the woods yet and that calls for strong solidarity and strong commitment by all euro area countries with respect to the euroarea and euro'.

Although the British pound rose from 1.5353 on short-covering after the release of BRC sales data , which showed that UK retail sales values rose 1.0% y/y in August versus July's +0.5% and the increase was largely due to weak sales figures a year ago, and climbed to an intra-day high of 1.5425, selling interest emerged at there and cable tumbled to 1.5296 due to the selloff in euro on renewed concerns over eurozone banking system before staging a recovery due to cross buying in sterling versus euro (eur/gbp tumbled from 0.8363 to 0.8253).

In global equities, DJI tanked on Tuesday due to renewed concerns over European banks and closed the day at 10341, down by 107 points, or 1.03%. FTSE-100, CAC-40 and DAX fell by 0.58%, 1.11% and 0.60% respectively.

Economic data to be released on Wednesday include:

Japan Trade balance (jpy), Current account, Machine orders, Economic watch DI, BOJ's September report, Germany Trade balance (euro), Current account, Export, Import, Industrial prod'n, U.K. BRC shop price index, Industrial prod'n, Manufacturing prod'n, Halifax hse prices, Canada Building permits, BOC rate decision, Ivey PMI.

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Market Review - 09/09/2010 22:47 GMT

Dollar hovers near 15-year low against yen

The greenback hovered above 15-year low against the Japanese yen on Thursday. The messages from Japanese officials were mixed and investors bet the Japanese government were not ready to stem the yen's rise.

Earlier in Asia, BOJ Governor Shirakawa said 'August 30 monetary easing wasn't aimed at dealing with forex, stock market volatility; will take appropriate monetary policy action when necessary; will supply ample fund to markets with BOJ's JGB buying program, other market operation tools.' He said that zero rates could destabilise economy and added that he did not discuss currencies and monetary policy at the government meeting.

In addition, Japanese Finance Minister Noda said 'conducting various simulations of foreign exchange interventions.' Noda said that he basically intended to defend Japan's interest in G7 negotiations and people were buying yen to reduce risk. He added he was not prepared to make any speculation on currency intervention.

The greenback fell initially from 84.04 against the Japanese yen in Asia after Wednesday's recovery from a 15-year low of 83.34, as the comments by BOJ Governor Shirakawa and Finance Minister Noda at the parliamentary committee did not have much impact on the Japanese yen. Later, despite dollar's weakness to 83.49 in Europe, dollar staged a rebound from there and rose to 83.94 after the release of better-than-expected U.S. weekly jobless claims data and then eased in NY afternoon.

U.S. weekly jobless claims data came in at 451,000, better than the economists' forecast of 470,000.

Although the single currency dropped from 1.2743 in Asia in reaction to bearish report by Financial Times Deutschland quoting comments from ECB's chief economist Stark who said German banks needed more capital, and euro hit an intra-day low of 1.2665, buying interest at there lifted eur/usd higher as European equities pared their early losses (FTSE-100, CAC-40 and DAX eventually closed the day up by 1.19%, 1.22% and 0.93% respectively) and the pair climbed to an intra-day high of 1.2767 in NY on renewed risk appetites after the release of U.S. jobless claims data. However, euro later retreated from there to 1.2687 in NY afternoon as DJI pared most of its early gain (about 80 points) and closed the day up by 28 points, or 0.27% at 10415.

European Central Bank President Jean-Claude Trichet said to a newspaper interview that there was no risk of deflation or inflation in eurozone at the moment. Earlier, ECB's Erkki Liikanen said he did not think double-dip recession likely. He added that 'slowdown in economic growth likely once stimulus measures have ended.'

Although the British pound edged lower in Asia on profit-taking after Wednesday's rally to 1.5534 and fell below 1.5400 to an intra-day low of 1.5376 in Europe after the release of weaker-than-expected U.K. trade data which showed a trade deficit of 8.67 billion pounds in July versus the expectations of 7.45 billion pounds deficit, cross-buying in sterling lifted price at there and cable rebounded strongly to an intra-day high of 1.5479 in NY morning. However, cable then retreated to 1.5425 in tandem with euro in NY afternoon.

The Bank of England kept interest rates unchanged at a record low of 0.5% and announced no new quantitative easing measures as widely expected.

In other news, BBC reported that British finance minster George Osborne planned an additional 4 billion pounds of welfare cuts on top of an 11 billion pounds reduction to the annual bill already planned.

The Australian dollar rallied from 0.9160 to 0.9278 on Thursday due to strong jobs data, as Australian unemployment rate in August dropped to 5.1% from 5.3% in July.

Economic data to be released on Friday include:

Japan Domestic CGPI, GDP Rev., GDP deflator, Cabinet Office's Econ. Report, U.K. PPI core, PPI input, PPI output, Canada Unemployment rate, Jobs-change, U.S. Wholesale inventories.

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Market Review - 11/09/2010 02:04 GMT

Dollar rose against yen due to upbeat Chinese import data

The greenback advanced against the Japanese yen on Friday as solid Chinese import data boosted investors' confidence on the global economic recovery.

Although the greenback rose initially to 84.30 against the Japanese yen in early morning trading in Tokyo on short-covering in reaction to the Japanese government statement that decisive measures would be taken, including forex intervention if necessary together with a widening in the U.S.- Japan yield spread, selling interest there pressured dollar to 83.75 in Europe. However, the greenback staged a strong rebound from there and climbed to 84.39 in NY before trading narrowly.

The greenback was supported by the increase in Chinese import, as the figure in August rose by 35.2%, versus the expectations of an increase of 26.1% and 22.7% in July. The data boosted investor's confidence as China may lead the global economic recovery.

In addition, Japanese Prime Minister Naoto Kan said in a debate with powerbroker Ichiro Ozawa that the government would take firm steps as needed to stop the Japanese yen's rise but added that joint intervention in currency markets was difficult. Earlier in Asia, Japanese Prime Minister Kan unveiled a 915 billion yen ($11 billion) economic package (50% of it would be used to stimulate consumer spending) to prop up the economy.

Despite euro's steep fall to an intra-day low of 1.2642 initially in Asia on renewed risk aversions due to a rise in U.S. Treasury yields, the single currency staged a strong rebound on short-covering and climbed to 1.2747 in Europe. However, the single currency fell to 1.2687 on concerns over banks ahead of a meeting to finalise European capital rules and a series of Chinese data over the weekend. The single currency later dropped again after recovery and sank to 1.2675 near NY closing, as IMF said to approve immediate disbursement of 2.57 billion euros for Greece and said Greece was ahead of schedule in making economic reforms.

China will release CPI, PPI, industrial output and retail sales data for August at 2:00GMT on Saturday.

In other news, the German banking association said the Basel Committee would probably require banks to have a Tier 1 capital ratio of 6% up from 4% and expected Germany's 10 biggest banks could need 105 billion euros of additional capital under the revamp of the banking rules.

The British pound fell initially in tandem with euro in Asia and sank to 1.5365 in European morning. Later, although cable rebounded strongly from there to 1.5468, renewed selling interest at there sent cable lower and cable tumbled to 1.5345 in NY afternoon due to cross selling in sterling especially versus euro, as eur/gbp rallied from 0.8214 to 0.8289.

On data front, U.K. core PPI in August rose by 0.1% m/m and 4.6% y/y as expected, versus the readings of 0.2% and 4.7% in July.

Economic data to be released next week include:

Germany WPI, Swiss Combined PPI, EU Industrial prod'n, EC's Interim Econ. Forecast, U.S. Fed budget on Monday, New Zealand Retail sales, Australia NAB business confidence, Japan Capacity utilisation, Industrial prod'n, U.K. N'wide Consumer Confi., RICS house prices, DCLG house prices, CPI, CPI core, RPI, RPI – X, Germany ZEW index, EU Labour cost, ZEW survey, U.S. Retail sales, Retail sales less auto, Business inventories, Canada Capacity utilisation on Tuesday, U.K. N'wide Consumer Confi., Australia W'pac consumer confi., U.K. Avg. earnings 3m, Claimant count, ILO unemployment rate, Swiss ZEW index, EU Employment , HICP final, CPI est., U.S. Import price, Import price index, Export price, Empire state mfg, Capacity utilisation, Industrial prod'n on Wednesday, New Zealand RBNZ rate decision, Japan Tertiary industry index, Swiss Industrial prod'n, SNB rate decision, U.K. Retail sales, BOE's Inflation Survey, EU Trade balance (euro), U.S. Current account (usd), Jobless claims, PPI, PPI core, Foreign treasury buys, Net LT TIC flows, Philadelphia Fed survey on Thursday, Germany PPI, EU Current account (euro), U.S. CPI, CPI core, Real earnings, U. Michigan survey Prel. on Friday.

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Market Review - 13/09/2010 22:49 GMT

Euro rallies as robust Chinese economic data and bank-regulation timeline boost risk appetite

Euro surged against the greenback on Monday, as upbeat Chinese economic data and new global banking rules boosted investors' risk appetites.

The single currency jumped from 1.2680 in NZ as Sunday's release of the Basel III bank capital rule which allowed banks up to 8 years (more time than expected) to raise its capital together with Saturday's release of stronger-than-expected Chinese industrial production (+13.9%, higher than the forecast of 13.0% and the previous reading of 13.4%) data boosted appetites for riskier assets, and then rallied to 1.2835 in Europe. Later, euro rose again after the comments from ECB's Trichet and climbed to an intra-day high of 1.2893 in NY on cross buying in euro especially versus sterling (eur/gbp rallied from 0.8269 to 0.8359).

ECB's Trichet said what was decided on Basel III would not hamper global recovery but would increase system's resilience. Trichet said the transition allowed new standards while supporting recovery as Basel III eliminated uncertainty. Trichet added he had full confidence that U.S. would implement standards decided together.

Earlier, ECB's Governing Council member and head of the Basel Committee on Banking Supervision Nout Wellink said banks would need hundreds of billions of euros of extra capital following an agreement of tougher capital rules.

On data front, EU Commission forecasted 2010 eurozone and German GDP growth at 1.7% and 3.4% versus the previous expectations of 0.9% and 1.2% respectively. EU Commission forecasted German inflation at 1.1% versus 1.3% previously.

Although the greenback rose to 84.43 against the Japanese yen in NZ on broad-based selling of yen in reaction to robust Chinese economic data on Saturday together with the Basel III banking rules which allowed banks up to 8 years to raise its capital, dollar pared its gain on profit-taking and tumbled to 83.50 in NY on dollar's broad-based weakness before stabilising.

The U.S. posted a $90.53 billion budget deficit in August versus the economists' consensus of $95 billion and smaller than the $103.56 billion budget gap a year ago.

Investors are focusing on DPJ leadership contest between Prime Minister Naoto Kan and kingpin Ichiro Ozawa on Tuesday.

Although the British pound surged from 1.5351 in tandem with euro and extended its rally to 1.5488 in European morning due to the Basel III bank rules, cable retreated from there to 1.5389 on active cross selling in sterling versus euro in late reaction that a trade union leader said on Sunday that large scale strikes against the British coalition government's plans to slash public spending were inevitable. Later, despite cable's recovery to 1.5466 in NY, the pound retreated on profit-taking and dropped to 1.5405 in NY afternoon.

Earlier, M&A demand gave support to the cable as global defense giant BAE Systems PLC had put parts of its North American commercial aerospace business up for sale in an auction that could fetch up to US$2 billion (1.3 billion pounds).

In other news, Reuters reported that British businesses believed UK could be heading for a double-dip recession according to a survey published by accountants & businesses advisors BDO LLP. The survey showed optimism among businesses in Aug had dropped to 93.1 from 95.5 in July. The latest index represented the lowest since the recession period between November 2008 and July 2009.


Economic data to be released on Tuesday include:

New Zealand Retail sales, Australia NAB business confidence, Japan Capacity utilisation, Industrial prod'n, U.K. N'wide Consumer Confi., RICS house prices, DCLG house prices, CPI, CPI core, RPI, RPI – X, Germany WPI, ZEW index, EU Industrial prod'n, Labour cost, ZEW survey, U.S. Retail sales, Retail sales less auto, Canada Capacity utilisation, Business inventories.

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Market Review - 14/09/2010 22:50 GMT

Dollar 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.

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