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The Dollar regained some of its shine yesterday as it regained lost ground ahead of Friday's all important non-farm payrolls numbers. These could lead to yet another round of dollar buying if the numbers come out higher than expected at 180k.
Yesterday a slight rise in the weekly jobless numbers failed to damage much the profit taking sentiment in the majors as traders trun cautious ahead of the payrolls.
Further helping the dollar were the factory orders which rose 0.5 percent-higher than expected.
Comments from the ECB chief Trichtet also helped weighed on the single currency as he acknowledged the downward revision in the euro zones growth forecasts for the currenct as well as next year.
In the same vein he also sounded less hawkish on his comments regarding the prospective rise in inflation when he stated that the inflation was expected to be capped at 2 percent in the next year.
Euro's neighbour Sterling also shrugged comments from the BOE officials as it joined the other majors in a fall to mid $1.92 levels.
Jawboning continues across the Pacific as Bank of Japan officials reiterate that such currency movements are a source of worry and a combined effort both from the ECB and BoJ was likely in the markets.
Yen was also pulled down on possible expectations of an intervention bid by the central bank ahead of the payrolls numbers.
The Dollar crumbled to new lows against the single currency despite a slew of data releases showing improving signs in the economy and a downgrade of Eurozone growth estimates. The pound surged to its highest level against the dollar since Black Wednesday, 16 September 1992, when the pound crashed out of the Exchange Rate Mechanism, the prototype for the euro, despite the Bank of England having spent £7bn of its reserves to support it. Sterling rose 1.1 per cent to $1.9303 against the dollar, a two-day gain of 2 per cent, and jumped 1 per cent to Y198.33 against the yen, an eight-week high, 1 per cent to £0.6892 against the euro and 1.4 per cent to SFr2.2069 against the Swiss franc. Yesterday saw the manufacturing ISM beat market estimates of 57.0 by rising to 57.8 and showing growth was broad based. Following this was the Fed's Beige book, which yet again reiterated a broad based improvement in the economy with manufacturing and services sector picking up and labor hiring also on the rise. The personal spending numbers also came out higher at 0.7 percent showing healthy signs for consumer behaviour in the US.
In the Eurozone although ECB downgraded its growth estimates for the region from previous 2.3 percent to 1.9 percent, traders seem unflinching in their goal of pushing the single currency higher, which hit a high of $1.3366 overnight.
A sharp fall in the oil prices as inventory numbers from US came out higher than expected and an upward revision from Saudi Arabia of its daily output helped the indices stage a smart rally yesterday with the NASDAQ and Dow rising by 1.9 and 1.65 percent respectively.
Yet another market defying PMI number from the UK at 55.0 and hawkish comments from the Bank of England governor Mervyn King regarding an improvement in the trade deficit due to a fall in the Sterling against the Euro helped the former to shoot up by yet another 2.5 cents to a high of $1.9334.
With no major correction in sight, the dollar was hammered again especially with cable giving a ‘sterling’ performance reaching a high of 1.9127. The rapid moves in cable was accelerated by comments from the BoE Governor Mervyn King, who expressed comfort with the currency strength and ready to shoulder the burden of forex adjustment along with Eurozone. Elsewhere, robust consumer spending during the third quarter helped the U.S. economy advance faster than expected but the inflation was the tamest in decades with PCE index rising by a mild 0.7%. The US GDP grew at 3.9% in Q3 (forecast: 3.7%). But OECD had a word of caution for the growth outlook for 2005 being marred by high-energy prices. The Conference Board also indicated a soft patch ahead as consumer confidence slid to an eight-month low of 90.5 in November (previous 92.9) with “job scarcity” being the chief concern despite strong economic growth. Consumer spending (that accounts for more than 2/3rd of the US economy), grew by 5.1%, more than 3 times the 1.6% notched in Q2. The Chicago PMI, a business barometer that includes the indices for hiring and new orders (among others), eased to 65.2 from 68.5 in October. The slew of mixed data from the US was no balm for the dollar, though it recovered slightly from a record low of $1.3334 against Euro. The ECB President Trichet hinted at eventual rate hikes, feigning nonchalance at Euro’s climb. The only hope for the dollar temporarily would be an exceptional payroll data for the 2nd consecutive month this Friday...
The Dollar resumed trading in indecisive markets ahead of a week lined with key economic data releases. Yesterday’s lack of data meant the dollar would loose no more, as traders shied away from a further sell off in the US currency.
The Swiss National Banks Chairman was the newest member of the list of people voicing concern over the recent spate of appreciation against the dollar.
Jawboning from the Japanese officials and some lack luster data releases from Japan saw the yen move back above the 103 levels.
The euro hovered around the 1.3250 levels, as Sterling moved back from the 1.8940 levels ahead of a week of key data releases.
The focus now shifts to the Euro zone Q3 GDP figures and the CPI figures expected today, with market expectations of dampening figures, there could be a long overdue correction in the euro.
Despite reassuring comments from the Saudi regarding any further price rise, oil prices remained firm at $49.74 per barrel.
With a host of data expected from the US and the Euro Zone as well, markets are expected to get choppy ahead.
Virtually every day the US dollar seems to hitting new lows. According to Intelligence Capital Advisiors it achieved a rare distinction last week- it even declined against the Zimbabwean dollar.
The dollar is starting to resemble the seven stone weakling who gets sand kicked in his face. Last week Russia hinted that it wanted to diversify it's foreign exchange reserves away from the dollar and China said it was up to the US to put it's affairs in order. It is a bit of a humiliation for the so called capitalist behemoth to get economic lessons from two (barely) ex communist powers. When negative opinion is so widespread about any asset price, the chances are there is scope for a short term rally. But when Alan Greenspan and legendary investor Warren Buffet are both arguing that the dollar should fall ove the long term- it is a very brave man who takes the opposite view. The search for dollar bulls continues as the bears take charge over the US economy, refuting to take in to consideration any kind of positive data. The World’s most dominating currency continued to be battered falling below 1.33 against the Euro as traders panicked at signs that Asian Central Banks might become more reluctant to fund the US current account deficit.
The dollar did sustain a brief rally when the Chinese Central Bank denied the rumors of reallocating their forex reserve portfolio in favour of Euro, helping the Greenback rise to 1.3205 against the Euro and 1.8850 against the Pound.
However, the rally was short lived as comments from Indonesian Deputy Governor hinting towards a shift in their forex reserve, reaffirmed the fears of Asian Central Banks dumping the US assets to avoid large losses as the dollar's value falls.
The Yen’s incessant rise hails from the silent reaction from the BoJ against the falling dollar and is now expecting a move to 101 during the week.
Though there have been comments from the monetary commissioner of EU indicating comfort for the Euro exchange rate at these levels, the economic indicators released (falling growth projections, reducing business sentiment, tumbling economic sentiment) are not supporting the statement; in turn calling for a more aggressive intervention from the ECB - which would eventually take the form of secret Euro selling via German and French commercial banks.
With projections of the bull-run extending further, we suggest that non-dollar importers should hedge their very short term import transactions; while exporters should hedge their receivables using the step up approach once it nears 1.3350.
US stocks held close to the flat line in an abbreviated post-Thanksgiving session on Friday, capping a modest, uninterrupted weeklong rally on Wall Street. The Dow Jones Industrial Average inched up 2 points to 10,522 for a fractional rise on the week. The Nasdaq Composite eased 1 point to 2,102.
