MORNING BRIEFING:  USD strengthening, as investors re-think their short positions

What’s new:
USD: Greenback staging a comeback this morning
United States: Fed’s Bernanke tending towards QE
United States: Volume and Timing of further easing keeps investors guessing
Aussie: Aussie and kiwi hit by what seems to be a round of profit taking


Today:




Rates in Asia and Indices:
EURUSD: 1.3983 - 1.3855.
USDCHF: 0.9639 – 0.9576.
GBPUSD: 1.6004- 1.5862.
EURJPY: 113.84 – 112.49.
USDJPY: 81.49 – 81.13.
DowJones: 11’062.78 -0.29%
NASDAQ:  2’468.77 +1.37%
S & P 500: 1’176.19 +0.2%
Nikkei: 9’498.49 -0.02%
Shanghai: 2'955.23 -0.54%
Gold: $ 1'360.3    
Crude Oil: $ 80.64

Comments:

US Dollar continued to strengthen during Asian trading this morning. This strengthening was also visible Friday afternoon after Fed Chairman Bernanke’s Friday speech. Essentially Bernanke did not provide any fresh news but his saying that he saw a case for “further action”, and concerns over inflation measures trending downwards – marked the first of Bernanke most visible tendency towards QE.

The Volume and timing remain unspecified however. The absence of more details with regards to volumes is making some investors think that QE could be stepped-in in a gradual manner. Given the huge market’s bets against the USD, investors were factoring in a more aggressive type of intervention. Now we are seeing investors rethink their short USD positions, and covering some of these USD short positions – consequently reflecting in more support for the USD.

Up till early this morning USD and JPY were the net gainers, with no particular news to explain this moves it seems that only profit taking can explain it. Euro, AUD and NZD were down - Aussie suffered some losses after hit parity last week, against the USD. Traders expecting this downward pressure on the Aussie to be short lived given the underlying fundamentals.

No major market moving data expected today, major equity indices were quite mixed at US close last Friday as banks are back to worry markets again. In Asian trading equity indices were in the red.

 Good day,


Rudolf Muscat
Trading desk

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