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.