By Peter Garnham
Published: June 8 2011 11:19 | Last updated: June 8 2011 23:00
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on Thursday, June 9, 2011 - 03:00 am.
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* Commodity currencies down on global growth worries
* EUR/USD gains capped by $1.47 options barriers
* Dollar gains but falls to month low vs yen on weak U.S.
outlook
(Updates prices, adds comment)
NEW YORK, June 8 (Reuters) – The dollar and yen rose on
Wednesday as worries that a slowing U.S. economy may stall
global growth fueled a bid for currencies seen as safe havens.
Adding to growth concerns was persistent uncertainty
surrounding the resolution of Greece’s debt crisis.
A report by the European Union, European Central Bank and
International Monetary Fund obtained by Reuters on Wednesday
indicated that the next disbursement of Greek aid cannot take
place until it corrects under-financing in the country’s
adjustment program. For details see [ID:nB4E7GU02C].
As a result, the euro slumped, commodity currencies fell
and the yen rose as high as 79.693 per dollar JPY=EBS, its
strongest since May 5. Investors unwound trades financed by
borrowing yen at low interest rates as fears grew that slower
global growth would hurt higher-yielding assets.
The same dynamics lifted the dollar against the euro and
high-yielding currencies such as the Australian dollar, traders
said. Low U.S. interest rates make the dollar, like the yen, a
popular funding currency.
“There has been a general shunning of risky assets because
of concerns about global growth, which of course take root here
in the United States,” said Joe Manimbo, senior market analyst
at Travelex Global Business Payments in Washington.
“These concerns have boosted safe-haven currencies such as
the dollar and yen.”
Data last week showing U.S. hiring slowed sharply in May
stoked anxiety about the global outlook. Investors grew more
risk-averse after Federal Reserve Chairman Ben Bernanke said
late Tuesday the recovery remained fragile. [ID:nN07142566]
The ICE dollar index, a measure of its value against six
major currencies, rose 0.6 percent to 73.955 .DXY.
The yen rose against both the dollar and euro, with the
greenback falling to a one-month trough at 79.693 yen JPY=EBS
on trading platform EBS. The dollar was last down 0.2 percent
at 79.890 yen.
Traders said losses accelerated after a series of automatic
sell orders were triggered on the greenback’s drop below 80
yen. More “stop-loss” barriers were said to be below 79.50.
The euro fell 1.0 percent to 116.411 yen EURJPY= and was
off 0.8 percent at $1.45683 EUR=, hurt by an unexpected 0.6
percent decline in German industrial output. [ID:nB4E7GN03F]
The commodity-sensitive Australian dollar AUD=D4 shed 0.9
percent to US$1.0611, while the greenback rose 0.5 percent
against the Canadian dollar CAD=D4 to C$0.9792.
A warning by Fitch Ratings that it could downgrade
America’s credit rating if the U.S. government fails to raise
its legal borrowing limit and misses some coupon payments had
little impact on the dollar. But it did highlight the country’s
mounting fiscal problems, which could have a long-term impact
on the greenback. [ID:nLDE7571VB]
Omer Esiner, chief market analyst at Commonwealth Foreign
Exchange in Washington, said the “market is leaning toward
expecting the debt ceiling will be raised before the U.S.
defaults. We view default as a very limited probability.”
He called Europe’s debt crisis more troubling, saying it
remained unclear whether Greece would adopt the new austerity
measures needed to secure a second bailout aimed at giving it
more time to repay its debt. [ID:nLDE7571OA]
But analysts still expect the ECB to raise interest rates
again this year to counter inflation, and its president,
Jean-Claude Trichet, is widely expected to hint at a July rate
hike after Thursday’s monthly policy meeting.
“Trichet is expected to reintroduce the words ‘strong
vigilance’ to his (statement) and if he does, it could send
euro/dollar toward $1.48. But if his lips do not utter those
words tomorrow, expect euro/dollar to crash down toward $1.45,”
said Kathy Lien, director of FX research at GFT in New York.
For the past few years, investors have come to view the
words “strong vigilance” as Trichet’s way of signaling an
impending rate hike the following month.
Sterling, meanwhile, fell against the euro and dollar
EURGBP=D4 GBP=D4 after credit rating agency Moody’s
repeated a warning that the UK could lose its prized triple-A
rating if it misses economic targets. [ID:nLDE7570KF]
(Additional reporting by Steven C. Johnson; Editing by Dan
Grebler)
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on Thursday, June 9, 2011 - 01:32 am.
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Tagged with: Commodity • Currencies • currency market • debt • dollar yen • EBS • euro • federal reserve chairman • federal reserve chairman ben bernanke • growth worries • international monetary fund • percent • Stocks Market
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NEW YORK (AP) — The dollar fell Wednesday against other safe-haven currencies, the yen and the Swiss franc, a day after comments from Federal Reserve Chairman Ben Bernanke heightened investor worries about a weakening U.S. economy.
But the dollar gained against currencies of countries that have higher interest rates such as the euro and Canadian and Australian dollars. Those currencies can benefit when investors are bullish and willing to make riskier bets; they suffer when worries about economic slowdown hit traders’ confidence.
Bernanke says that higher gas prices and the Japanese crisis have hurt the U.S. economy but expects the hit will be temporary. A slowdown in the U.S., the world’s biggest economy, could hurt other countries.
The dollar fell to a one-month low against the yen and traded near a record low versus the Swiss franc. In late trading, the U.S. currency fell to 79.94 yen from 80.19 yen, and dropped to 0.8371 Swiss franc from 0.8375.
Meanwhile, the euro slipped to $1.4581 from $1.4695, retreating from a one-month high of $1.4696 hit on Tuesday. The euro has risen steeply since May 23, the last time it traded below $1.40, because investors are increasingly reassured that European officials will put together an extended aid package for Greece. Greece already received a 110 billion euros ($161 billion) international rescue package last year, but its borrowing costs remain high and investors fear a default without additional aid.
European finance officials have not yet been able to agree on how to structure the deal, however. On Wednesday, the euro came under pressure because the German finance minister proposed that a new package should require “quantified and substantial contribution” from private bondholders. That could imply a default, and the European Central Bank has strongly opposed such a move.
A default in Greece could trigger more downgrades from ratings agencies, hurt the Greek banking system and push up the borrowing costs for other indebted European countries.
In other trading, the British pound fell to $1.6390 from $1.6451, while the dollar rose to 97.92 Canadian cents from 97.38 Canadian cents. The Australian dollar dropped to $1.0623 from $1.0736. The dollar was also higher against most of the world’s other actively traded currencies.
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on Thursday, June 9, 2011 - 00:54 am.
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By Deborah Levine and William L. Watts, MarketWatch
NEW YORK (MarketWatch) — The dollar rose against the euro and other major currencies on Wednesday after a speech by Federal Reserve Chairman Ben Bernanke offered no sign a further round of quantitative easing is in the works.
His comments, out late Tuesday, had weighed on the dollar in the direct aftermath of the speech. But as global equities and commodities also sold off in reaction, investors moved to the dollar and other currencies sought as safe havens.
The dollar index
/quotes/zigman/1652083 DXY
-0.02%
, which measures the performance of the U .S. unit against a basket of six currencies, rose to 73.946, up from 73.528 in late North American trading on Tuesday.
Japan’s currency continues to rise, adding more complications as the country recovers from its recent earthquake and tsunami.
A decline in investors’ appetite for risk tends to benefit the dollar and safe-haven currencies such as the Swiss franc and the Japanese yen.
The dollar
/quotes/zigman/4868099/sampled USDJPY
+0.3630%
bought 79.95 yen, down from ¥80.05 Tuesday
The yen has moved back toward a record high that had prompted coordinated central-bank intervention in currency markets after Japan’s March earthquake.
Read column on U.S. helping yen.
Analysts also noted that U.S. Treasury yields fell to new lows — in particular, 2-year note yields
/quotes/zigman/4868354 2_YEAR
+2.06%
approached a record low. These have a strong correlation to the dollar declining against the yen because Japanese investors buy a lot of U.S. bonds are sensitive to yields.
Read more on Treasury yields.
The euro
/quotes/zigman/4867933/sampled EURUSD
+0.1966%
fell to $1.4573, versus $1.4696 late Tuesday.
The euro also fell against the Swiss franc
/quotes/zigman/4868091/sampled EURCHF
+0.2338%
, down 0.8%. The U.S. dollar
/quotes/zigman/4868123/sampled USDCHF
+0.0224%
slipped about 0.1% against the franc.
Bernanke said he expects U.S. jobs and growth to pick up in the second half of the year, while acknowledging that the economy has so far been surprisingly weak.
Read the text of Bernanke‘s speech.
The remarks suggest a further round of quantitative easing, or QE3, is unlikely even if the economy continues to dip, said Kathleen Brooks, research director at Forex.com.
“Risky assets got hit and Bernanke’s comments caused a flight to safe havens,” she said.
As for U.S. data, the only major report due out is the Federal Reserve’s Beige Book, a compilation of economic anecdotes from the regional Fed banks. The report highlighted signs of slowing but some gradual improvement in labor markets and had little impact on currency prices.
See story on Beige Book.
Also weighing on the euro, more public tensions between Germany and other countries surfaced about how to deal with Greece’s debt problems.
Analysts said the European Central Bank and Germany appear headed for a clash over Greece after German Finance Minister Wolfgang Schaeuble late Tuesday sent a letter to the central bank and euro-zone finance ministers calling for a seven-year rollover of Greek debt.
Read “ECB, Germany head for clash over Greece.”
Schaeuble has warned about the threats of a disorganized insolvency for Greece, but time pressures and the complexity of the matter could lead to such an outcome, said currency strategists at Commerzbank.
“The foreign-exchange market does not seem to have grasped this risk so far,” they said in a research note. “A controversial debate between the individual parties over the coming days is likely to change that.”
Adding further pressure on the currency, German manufacturing output came in weak, but the European Central Bank’s still expected to signal on Thursday that it intends to raise interest rates.
See story on ECB, rate hike.
Separately, the British pound came under pressure after Market News International quoted a Moody’s Investors Service analyst as saying Britain’s AAA credit rating could be threatened if growth remains weak and the government doesn’t meet its deficit targets.
A Moody’s spokesman subsequently said the remarks don’t represent the company’s “central scenario,” Dow Jones Newswires reported.
Sterling
/quotes/zigman/4867886/sampled GBPUSD
-0.0023%
, which fell as low as $1.6346 earlier, traded lately at $1.6392, down from $1.6444 Tuesday.
Deborah Levine is a MarketWatch reporter, based in New York.
William L. Watts in Frankfurt and Sarah Turner in Sydney contributed to this report.
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on Thursday, June 9, 2011 - 00:31 am.
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on Wednesday, June 8, 2011 - 23:45 pm.
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The yen is flirting with a key level against the dollar. Will central banks intervene?
Japan has plenty of challenges on its plate, thank you, without a strong currency making a tough recovery even harder. So with the yen hovering around 80 to the dollar, (Exchange: JPY=X) investors are whispering about a possible market intervention.
Actually, it’s not just chatter. The IMF’s acting head, John Lipsky, warned in a press conference that the G-7 countries are prepared to intervene again if it’s warranted, given the success of the most recent intervention, in March.
“It’s clear that the G-7 at least is willing to take action in the case of market conditions that appear to be disorderly,” Lipsky said.
Before you trade on anticipation of an intervention, though, it’s worth noting that some key conditions that existed before the most recent intervention are not present right now.
Marc Chandler, chief currency strategist at Brown Brothers Harriman, points out that volatility is much lower now than it was in March. In fact, 3-month implied volatility is at its lowest level since March 14. Also, the difference in yield between 2-year Treasurys and 2-year Japanese government bonds is about 22 basis points, much lower than the 60 basis-point differential of two months ago. It’s quite likely, Chandler told me, that the move in yen-dollar is a result of dollar weakness rather than undue yen strength.
How would Chandler rate the odds of an intervention right now? “Two chances: slim and none, and slim just left town.”
Tune In: CNBC’s “Money in Motion Currency Trading” airs on Fridays at 5:30pm.
“Money in Motion Currency Trading” repeats on Saturdays at 7pm.
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on Wednesday, June 8, 2011 - 22:58 pm.
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You can follow any responses to this Post through the RSS 2.0 Click to Comment The yen is flirting with a key level against the dollar. Will central banks intervene?
Japan has plenty of challenges on its plate, thank you, without a strong currency making a tough recovery even harder. So with the yen hovering around 80 to the dollar, [ JPY=X 79.79 
-0.34 (-0.42%) ] investors are whispering about a possible market intervention.
Actually, it’s not just chatter. The IMF’s acting head, John Lipsky, warned in a press conference that the G-7 countries are prepared to intervene again if it’s warranted, given the success of the most recent intervention, in March.
“It’s clear that the G-7 at least is willing to take action in the case of market conditions that appear to be disorderly,” Lipsky said.
Before you trade on anticipation of an intervention, though, it’s worth noting that some key conditions that existed before the most recent intervention are not present right now.
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on Wednesday, June 8, 2011 - 22:09 pm.
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You can follow any responses to this Post through the RSS 2.0 Click to Comment Speculators and arbitrageurs have driven up the volume of Indian rupee/US dollar futures traded on the Dubai Gold and Commodities Exchange as investors take advantage of emerging-market volatility and tighter bid-offer spreads.
The number of rupee futures traded jumped to nearly 131,000 last month, up 1,413 per cent year on year, according to data from the DGCX, which is the only regulated and cleared exchange on which foreigners can trade such contracts.
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on Wednesday, June 8, 2011 - 21:30 pm.
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You can follow any responses to this Post through the RSS 2.0 Click to Comment by Adam Solomon
The Pound briefly rallied against the US Dollar exchange rate yesterday, rising to a high of 1.6470, as global stocks and commodity rose, after the ECB president Jean-Claude Trichet gave a strong indication that the central bank will support Greek government bond rollovers. The UK currency traded higher against the Dollar for the third day in four, after a report on the UK housing market showed that prices rose 0.1% in May, following the 1.4% decline the previous month.
The overall improvement in risk appetite has curtailed demand for the U.S Dollar but the Pound failed to hang on to the gains, falling back towards 1.64 by midday, as the outlook for the UK economy continues to be clouded with uncertainty. The FTSE 100 Index advanced 0.2% on the day and the Standard & Poor’s 500 Index rose 0.5%. The Pound has weakened for six straight days against the Euro, plunging to a low of 1.1159 overnight.
Further speculation that the European Central Bank will raise interest rates again before the Bank of England has continued to hamper sentiment for the Pound. In the UK, there were also concerns of weakening demand, as consumer spending remains under pressure, amid the most aggressive public spending cuts in a generation and rising consumer prices.
The consensus is that the monetary policy committee will not raise interest rates at this week’s meeting. In the widely unlikely event that policy makers to do implement a rate increase, the Pound may still come under pressure, amid concerns that higher borrowing costs would further damage the already fragile economic recovery.
The Pound weakened again against the Euro exchange rate overnight, trading within a penny of its weakest level in a month, after a report from the British Retail Consortium showed that UK shop price-inflation unexpectedly slowed in May. The UK currency subsequently lost ground versus a basket of currencies, as prices charged by retailers rose just 2.3% from a year earlier, the slowest pace in 2011.
Elsewhere, the European Commission said that the government faces a difficult balancing act this year in implementing the deficit-reduction plan, while sustaining economic growth. The EC also said that UK growth forecasts are too optimistic and that will prompt speculation that the economy may stall in the second quarter, even though the full extent of the government’s cuts have yet to be felt.
UK retail sales fell in May, as rising prices and concern about finances curtailed consumer spending. A separate report also showed that unemployment rose in May and the reports combined will add to concerns that service-sector growth is slowing. The Pound is likely to fall back towards 1.10 against the Euro in the build up to the ECB announcement this week, with Trichet expected to indicate a rate increase for July.
The Euro exchange rate made widespread gains against the majors yesterday, on speculation that officials will contain the sovereign debt crisis and proceed to raise interest rates over the coming month. The single currency reached the highest level in a month versus the U.S Dollar, advancing 0.8% on the day to 1.47. The Dollar was subjected to renewed selling pressure, as global risk appetite improved.
There was a warning from a Chinese economic institute that China should be wary of holding too many dollar-denominated assets, which also triggered initial selling pressure on the Dollar. Although the comments were later removed from the website, overall confidence remained fragile. The Federal Reserve Chairman Ben Bernanke is expected to say that the economy remains in need of boost today and that may prompt further speculation that the Fed will embark on further quantitative easing.
In the Euro-zone, there was renewed optimism that Euro-zone leaders would be able to agree a fresh rescue package for Greece. The Euro was supported by expectations that the ECB would adopt a hawkish rhetoric in the monthly press conference on Thursday and the single currency encountered strong resistance just above 1.47 at the close of trading last night.
EU 10:00 – GDP Details (Q1)
GER 11:00 – Industrial Production (April)
U.S 19:00 – Federal Reserve Bank publishes Beige Book
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on Wednesday, June 8, 2011 - 13:58 pm.
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* Sterling hits 1-mth low vs euro; 90 pence per euro in view
* Moody’s analyst reported saying UK’s AAA rating at risk
* Agency confirms its outlook on UK is stable
* Eur/stg seen supported ahead of Thursday’s ECB meeting
LONDON, June 8 (Reuters) – Sterling fell to a one-month low
against the euro and slid against the dollar on Wednesday after
a media report quoting a Moody’s analyst saying the UK was at
risk of losing its top-notch rating.
According to the report, the analyst said the UK could lose
its AAA rating if growth remained weak and the government failed
to meet its fiscal consolidation targets. [ID:nLDE7570E4]
The rating agency subsequently said its outlook for Britain
was stable, though it might reconsider if targets were missed.
The euro rose to 89.76 pence EURGBP=D4, taking it beyond
the previous day’s one-month high of 89.45 pence and leaving it
on course for a test of the psychologically key 90.00 pence
which has proved stiff resistance in the past.
By 0813 GMT, sterling had inched back up to 89.55, leaving
the euro up 0.25 percent on the day.
The single currency is expected to stay supported ahead of a
European Central Bank meeting on Thursday where policymakers are
expected to signal a near-term rate rise.
“The ECB will probably be on the hawkish side, which leaves
room for the euro to move above 90 pence,” said Simon Smith,
economist at FXPro.
By contrast, a weak UK economy is expected to ensure the
Bank of England leaves rates at record lows for some months to
come, widening the yield differential between the UK and euro
zone and increasing the appeal of the euro against the pound.
Against the dollar, sterling GBP=D4 was down 0.4 percent
at $1.6375, having hit a session low of $1.6355.
A BoE meeting on Thursday is expected to result in rates
staying on hold at 0.5 percent. It is expected to have little
impact on markets given that details of the policy debate will
not be known until the minutes are released in two weeks’ time.
FXPro’s Smith said it was possible that at least one of the
two members who have recently voted for a hike — Martin Weale
and Spencer Dale — may have revised their views due to recent
weak UK data.
The fragility of Britain’s economy is holding the BoE back
from raising rates even as inflation risks remain stubbornly
high.
Adding to concerns about a slowing recovery in the British
economy, a survey on Wednesday showed recruiters filled
permanent and temporary vacancies at the slowest pace in seven
months in May [ID:nLDE7561IT]
It followed figures on Tuesday showing an unexpected fall in
UK retail sales and weak housing figures for last month
[ID:nLDE7560FD] [ID:nL9E7F600L]
(Editing by John Stonestreet)
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Posted by Currencies
on Wednesday, June 8, 2011 - 13:20 pm.
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Tagged with: Analyst • Currencies • currency market • economy • Moody • outlook • percent • record lows • Stocks Market
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