Dollar wobbles again and remains on edge

The dollar was dealt a blow on further rhetoric; this time from Japanese Prime Minister raising speculation about Asian Central Banks diversifying their dollar reserves.
The dollar remained under pressure as oil and commodity prices remained at near highs. Oil prices eased off marginally to 53.35 after a bout of increased speculation the earlier week. The outcome of the OPEC meeting scheduled next week to decide on the price band should give some reprieve to escalating oil prices.
Euro at a two month high traded in a range just above the 1.3420, topping at 1.3458.
Greenspan’s statements about not being 'overly' worried about the trade figures helped the US currency recover off lows.
Higher than expected January's Industrial production figures at 3.1 from Germany refrained traders from paring the single lower.
Cable was dealt a blow as trade figures at –5.2 billion and Industrial Production figures at –0.2 per cent were way below market expectations, dipping to the days low of 1.9205.
Yen continued to stay afloat above the critical 103.80 resistances after rallying initially to 103.66 as traders rushed to sell at lower levels.
The markets were confined to range bound trades as traders remained cautious ahead of the all important US trade figures and Greenspan’s speech today.

Dollar edgy ahead trade deficit data and swelling oil prices

Oil prices escalated to a high of $55.65/barrel (April Futures) making the dollar nervous about rising inflation and increasing fiscal deficit, facilitating its fall to a two month low against euro at 1.341 overnight.
The fate will be decided after the OPEC meeting, next Wednesday on production policy. Euro touched a high of 1.3455 in the morning session in Tokyo, marching towards the next level at 1.3475.
The market is clearly focused on Friday's trade data, having shown little reaction to the US Federal Reserve Board's latest economic report via its "Beige Book", which emphasized on rising input costs and escalating inflation.
The yen though strong, bounced back repeatedly from the crucial support at 103.8 inviting huge selling at that level.
Australia's unemployment rate remained at a seasonally adjusted 5.1% in February below the market consensus rate of 5.2% pushing it to the high of 0.7983 this morning, unable to break the crucial 0.80.
Pound is waiting at the sidelines and has not gained much compared to its European counterpart as markets await decision of the BoE’s Monetary Policy Committee today on any further interest rate hike, expected to be kept stable at 4.75% unless any inflationary threats are seen.

Soaring oil prices and deficit worries hound the dollar again

A series of factors sent the dollar tumbling vis-à-vis the international majors as the greenback plummeted to a 13-month low against the Australian dollar, 2-month bottom versus the euro and 2 and a half-month floor against the sterling.
Crude oil surged to as high as $54.82 per barrel in the Japanese session on increasing demand concerns to the detriment of limited supplies. Further pressurizing the dollar were Fed Governor Bernanke’s comments on one hand, which indicated reducing possibility of accelerated interest rate hikes while a top ECB official remarked that medium-term inflationary pressures have built up due to excess liquidity thus suggesting that ECB maybe leaning towards raising interest rates.
The single European currency broke past the resistance of 1.3310 to soar as high as 1.3358 while cable skyrocketed above the 1.93 mark to touch a peak of 1.9328.
Notwithstanding the pressure of rising oil prices on the Japanese economy, the yen briefly touched above the 104.50 mark to trade around the 104.65 mark in the early Japanese session. Persistent purchases by foreigners continued for the 19th consecutive week sending Nikkei surging towards the 12,000 mark.
Currency markets would be eagerly looking forward to the release of US trade deficit figures for January due to be released on Friday which is expected to widen to $56.5 billion compared to previous month’s figure of $56.4 billion.
In a report released by the Bank of International Standards, the Asian Central Banks were seen cutting their reserves held in dollar from 81% in 2001 to 67% in September 2004.

Sterling rises as UK retail spending holds up

Sterling improved in European morning trade on Tuesday as a slowdown in high street sales was less dramatic than feared.
The British Retail Consortium said like-for-like UK retail sales fell 0.3 per cent in February. Although this was sharply down on the +0.5 per cent recorded in January, it was better than many of the figures bandied about in the weekend press.
This allowed the pound to strengthen 0.7c to $1.921 against a soft US dollar, 0.1p to £0.6893 against the euro and Y0.7 to Y201.94 against the yen.
The New Zealand dollar was once near the top of the leaderboard, rising a further 0.3c to a fresh 22-year high of $0.7378 against its US namesake, as carry trade investors continued to buy the kiwi to benefit from high interest rates.
The market is split almost 50-50 as to whether the Reserve Bank of New Zealand will raise its main interest rate, already the highest in the developed world at 6.5 per cent, by a further 25 basis points on Thursday.
The internal debate at National Australia Bank is a microcosm of the market’s uncertainty over Thursday’s rate call. Citing data showing a 4.8 per cent fall in building work in the fourth quarter, Tim Fox, head of market strategy, said: “Our NZ economists now see only a 50 per cent chance of a rate rise. However, with inflationary pressures building they still believe that the RBNZ will eventually be forced to move, the question is whether that will be in March or April.”
The Australian dollar, another high-yielder, rose 0.5c to a one-year high of $0.7950 against the greenback.
The US dollar was weak across the board, slipping to $1.3254 against the euro and Y105.02 versus the yen, with some commentators citing data earlier in the week from the Bank for International Settlements suggesting Asian central banks are continuing to diversify out of the dollar, as a cause.
The yen was also soft, slipping to Y139.22 to the euro, as nominal January household spending in Japan rose just 0.5 per cent year-on-year, below expectations for a 2.1 per cent increase.

Dollar weakens on payroll data

The dollar’s movement on Friday exhibited a conundrum as a much stronger than expected payrolls failed to inspire the reserve currency and instead led to a sharp sell off in the USD with the dollar closing the week at mid $1.32 levels against the euro.
The payrolls figure came out at 262k against a forecasted 220k but still the floor beneath the greenback’s feet slipped as the market’s whisper numbers had risen to 300k and thus the traders were disappointed with what they got. Both the services and the manufacturing sectors added sufficient jobs to give support to the view that the Fed will continue to raise rates to 3 percent by late summer this year.
Also depressing the dollar further was the University of Michigan consumer sentiment data, which came below consensus at 94.1 versus 94.5 expected, while the unemployment rate rose to 5.4 percent from the expected 5.2 percent.
In other news treasury officials stated that there was no indication yet that foreign central banks were diversifying away from US assets in a major way while Chinese premier also commented that China was taking necessary steps to reform the exchange rate mechanism of renminbi.