Greenback Drifts Lower on Shift to Risk

The dollar fell against the majors at the start of the week, sliding to a 6-week low against the euro at 1.4248 and a one-month low versus the Canadian dollar at 1.1023. The greenback came under pressure amid gains in the US stock market, which was prompted by news that troubled lender CIT would be bailed out by bond holders and thus avert bankruptcy.

The economic calendar saw the release of the June leading economic indicators, which declined by less than expected to 0.7%, beating calls for a decline to 0.5% versus 1.2% in May. The data slated for release this week will see May home prices, weekly jobless claims, June home sales and the July University of Michigan consumer sentiment survey.

The major fx pairs are likely to remain confined within range in the upcoming week with only a handful of reports slated for release. The key highlight will be Fed Chairman Bernanke’s Congressional testimony, which begins on Tuesday. Markets will be looking to Bernanke’s comments to Congress on how the FOMC will begin to rein in quantitative easing in order to quell nascent inflationary fears.

Global Equity Slump Props USD

Risk aversion propped the dollar higher against the majors in Wednesday trading amid a retreat in the global equity markets – with Shanghai’s Composite Index plummeting by 5% overnight. Commodities also slumped with gold falling to its lowest level in 2-weeks just above the $927 per ounce level and crude oil sliding to below $64 per barrel. The greenback pushed the euro toward the 1.40-figure and the Swiss franc around the 1.09-handle.

US economic reports released this morning saw durable goods orders decline sharply in June, posting a monthly decline of 2.5% versus a downwardly revised increase of 1.3% from May. The excluding transports durable goods orders improved to 1.1% compared with a downwardly revised 0.8% increase a month prior. The Fed’s Beige Book revealed the pace of economic decline had moderated or stabilized at a low level in most districts adding that the manufacturing sector remained subdued but slightly more positive than in the past. The Fed said there was still slack in the labor markets, with most sectors reducing jobs or holding steady and net employment falling.

Meanwhile, NY Fed President Dudley expressed optimism over the economy, saying he expects moderate growth in the second half of this year, albeit considerably slower than in past recoveries. Dudley said “the balance of risks is still tilted toward weakness in growth and employment and not toward higher inflation”, suggesting that the Fed will likely maintain low interest rates for some time to come. Lastly, he said that “if the recovery does, in fact, turn out to be lackluster, the unemployment rate is likely to remain elevated and capacity utilization rates unusually low” in the near-term.

USD/CAD Mid-Day Outlook

USD/CAD's fall extends further today and at this point, intraday bias remains on the downside as long as 1.1469 minor resistance holds. As discussed before, a short term top is formed at 1.1723 after USD/CAD formed a small diagonal triangle with bearish divergence condition in 4 hours MACD and RSI. Deeper decline should be seen that send USD/CAD through 38.2% retracement of 1.3063 to 1.0784 at 1.1655. Nevertheless, fall from 1.1723 is viewed as a correction to rise from 1.0784 only and hence, downside is expected to be contained by 1.0940/1289 support zone, probably by 61.8% retracement at 1.1143 to complete the correction. On the upside, above 1.1469 will turn intraday outlook neutral first but break of 1.1723 high is needed to confirm rally resumption. Otherwise, consolidation is still in progress..

In the bigger picture, fall from 1.3063 is treated as correction to impulsive rally from 0.9056 to 1.3063 and has met target support zone of 1.0297/0819 already. We're slightly favoring the case that such correction has completed at 1.0754 already, considering that daily MACD is now positive too. Break of mentioned 1.1475/1.1814 resistance zone will confirm this case and should at least bring strong rally to key cluster resistance at 1.2191 (61.8% retracement of 1.3063 to 1.7084 at 1.2192). On the downside, below 1.1542 indicates a short term top is formed, but considering the possible five wave structure of the rise from 1.0784 to 1.1723, we'd expect following price actions are corrective in nature and be contained by 1.0940/1289 support zone and bring rally resumption.

Mid-Day Report: Strong Rebound in Commodity Currencies, Euro in Range

Dollar and yen are generally lower against commodity currencies today but remain steadily in range against Euro and Swiss. The improvement in investor sentiments is not carried through to early US session. Stocks in US open flat despite strong earnings report from Goldman Sachs and solid retail sales report. Canadian dollar's rise today is impressive consider nearly 100pts gain against dollar. Nevertheless, it's viewed as a catch up of major's rebound against dollar and anticipation of further recovery in oil prices, rather than a reversal in recent trend. Overall, we'd maintain the view that yen crosses are in consolidation only, so are dollar majors.

US headline retail sales rose for the second consecutive month by 0.6% in June and beat expectation of 0.4%. Ex-auto sales, though rose less than expected by 0.3%. PPI surged sharply by 1.8% mom in Jun and pushed yoy rate from -5.0% to -3.6%. Core PPI also rose much more than expected by 0.5% mom and sent yoy rate up from 3.0% to 3.3%.

German ZEW investor confidence unexpectedly fell for the first time in nine months from 44.8 to 39.5 in June, badly missed expectation of a rise to 47.8. Current situation gauge improved slightly from -89.7 to -89.3 though. Eurozone ZEW, on the other hand, also missed expectation by dropping from 42.7 to 39.5. Eurozone industrial production also rose less than expected by 0.5% mom only in May.

UK CPI slowed to 1.8% yoy in June, below BoE's target of 2% for the first time in nearly two years. Core CPI was unchanged at 1.6%. RPI met expectation by slowing to -1.6% yoy. UK RICS house price balance improved significantly from -43.8% to -18.1%, suggesting that the number of respondents saying prices dropped exceeded those reporting gains by 18.1 percentage points, which is the best reading since Sep 07. DCLG house price improved more than expected from -13.0% yoy to -12.5% yoy in May. BRC Sales Monitor rose 1.4% in Jun, up from 0.8% a month ago.

From Australia, NAB Business Confidence jumped from -2 to 4 in Jun, the first positive reading in 18 months.

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U.S. Treasury and the Dollar

Past history indicates a relationship between the background of the US Treasury Secretary and the direction of the US dollar. Treasury chiefs who spent a considerable part of their carreer in the private sector, particularly in banking an finance, have led through a strong dollar period.

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Factors Affecting the US Dollar
Factors Affecting USD/JPY
Factors Affecting EUR/USD
Factors Affecting GBP/USD
Factors Affecting USD/CHF
Factors Affecting AUD/USD
Factors Affecting USD/CAD

FOREX RATES

FOREX RATES Pakistan Open Market Forex Rates Updated at : 9/7/2009 2:52 PM (PST)
Currency	Buying	Selling
Australian Dollar	63.30	64.50
Canadian Dollar	69.65	70.95
China Yuan	11.25	12.00
Euro	113.00	115.00
Japanese Yen	0.8690	0.8790
Saudi Riyal	21.65	21.85
U.A.E Dirham	22.15	22.35
UK Pound Sterling	131.50	133.50
US Dollar	81.85	82.15

U.S. Forex Market Commentary

EURO

The euro extended recent gains vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4115 level and was supported around the $1.3980 level. The common currency has been well-bid from the $1.3890 level during yesterday’s North American session and was higher again today on China’s latest call to lessen its reliance on the U.S. dollar by advocating a new supranational currency. Data released in the U.S. today saw May personal income rise 1.4% while May personal spending up 0.3%. These data suggest U.S. consumers have raised their marginal savings rate substantially, to the detriment of countries like China that export heavily into the U.S. Despite China’s latest calls for a new global currency and despite the unprecedented level of debt being sold by the U.S., recent Treasury auctions have performed very well with a high percentage of indirect bidders – suggesting China may still be recycling its massive current account surplus back into U.S. assets. The May PCE deflation was up 0.1% and final June University of Michigan consumer sentiment printed at 70.8, up from 68.7 in May. The improvement in consumer sentiment took confidence levels to their highest level since September. In eurozone news, German consumer prices were unexpectedly higher in June, up 0.4% m/m and 0.1% y/y. Bank of Italy reported the eurozone’s economic contraction eased in June with the EuroCoin indicator falling to -0.61 from -0.89 in May – the fourth consecutive increase. France’s finance ministry reported it expects more joblessness over the next several quarters. Euro bids are cited around the US$ 1.3435 level.

STERLING

The British pound appreciated sharply vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.6560 level and was supported around the $1.6365 level. Cable came within 60 pips this week of establishing a multi-month high dating to November 2008. Cable bids are cited around the US$ 1.6125 level. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.8505 level and was capped around the ₤0.8570 level.

SWISS

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0795 level and was capped around the CHF 1.0945 level. Data released in Switzerland saw the June KOF leading indicator climb to -1.65 from -1.85 in May. U.S. dollar offers are cited around the CHF 1.1165 level. The euro and British pound came off vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.5210 and CHF 1.7850 levels, respectively.

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UPDATE: Asian Shares Mostly Fall; Kospi Up On Samsung Elec

UPDATE: Asian Shares Mostly Fall; Kospi Up On Samsung Elec

(Adds information, quotes, updates/adds market levels)

By Rosalind Mathieson

Of DOW JONES NEWSWIRES

SINGAPORE (Dow Jones)--Asian shares were mostly lower Monday in quiet trade after a U.S. holiday Friday, with some caution creeping in as the U.S. corporate earnings season drew closer. Oil, commodity and shipping stocks were leading decliners though Samsung Electronics supported in Seoul after some reassuring comments on its second quarter performance.

Japan's Nikkei 225 was down 1.6% with Australia's S&P/ASX 200 off 1.5% and New Zealand's NZX-50 down 0.6%, with Hong Kong's Hang Seng Index down 1.3% and Taiwan's main index 0.5% lower. South Korea's Kospi Composite was up 0.2% but off its initial highs.

"Sentiment isn't great at the moment. The market may have run a bit hard in the second quarter. This is just a retracement and not unexpected," said Macquarie Private Wealth senior private client adviser Marcus Droga.

U.S. stock futures were down 0.8%-0.9% in screen trade, with front-month Nymex crude oil futures down $2.02 at $64.71 a barrel on Globex after Friday's holiday.

The U.S. earnings season kicks off on Tuesday with Alcoa reporting its second quarter results.

"Some of our clients have become a bit more risk adverse in recent days. They have either been selling or not buying," said ABN Amro head of Asia research Daphne Roth in Singapore.

Oil, shipping and steel stocks were lower for another day. "The market is now aware that its economic recovery expectations had been too high," said Yumi Nishimura, a market analyst at Daiwa Securities SMBC.

Inpex was down 2.9% with Nippon Yusen off 3.4% and JFE Holdings down 1.9% in Japan, while in Sydney, BHP Billiton was off 2.4%, Origin down 1.7% and Santos off 2.8%.

Rio Tinto fell 1.2% in Sydney. The company said it would sell its Alcan Packaging Food Americas division to Bemis Company for US$1.2 billion.

Blue-chip exporter stocks were also lower in Tokyo on strength in the yen, with Sony off 1.8% and Honda Motor down 1.7%.

Samsung Electronics gained 4.5% and was helping the broader technology space in Korea, with LG Electronics up 2.5%. The world's biggest memory-chip maker by revenue said it expected second-quarter sales to come in higher than a year earlier, while its operating profit was expected to be between KRW2.2 trillion and KRW2.6 trillion.

Samsung Engineering added 3.6% after news it had signed a $2.6 billion, three-year contract with Algerian state-owned Sonatrach to modernize an oil refinery.

The Shanghai Composite was showing some resilience, up 0.7% with gains in toll-road operators before Sichuan Expressway's A-share offer. Jiangxi Ganyue Expressway was up 3.5%.

Sichuan Expressway was 2.1% higher in Hong Kong trade.

Taiwan construction stocks were supported by a report in the Commercial Times the government would speed up its urban renewal plans. Founding Construction and Development was up by its daily 7.0% limit.

Flat-panel makers gained in Taipei, too, with an Economic Daily News report that panel prices were rising. AU Optronics added 2.1% and Chi Mei Optoelectronics rose 2.2%.

Malaysian shares were down 0.2% with Singapore stocks off 0.5%, Indonesian shares of 1.1% and Philippine shares flat.

There was choppy trade in currency markets after the U.S. holiday with the Japanese yen making some gains as regional stock markets fell.

The euro was at $1.3974, from $1.3985 late in North America on Friday, and at Y133.04, from Y134.25. The U.S. dollar was at Y95.27, from Y95.99, for its lowest level since June 29.

Traders were looking ahead to the week's meeting in Italy of the Group of Eight leading nations and for any further discussion on the U.S. dollar's status as the main global reserve currency.

Analysts at Calyon said "we doubt the G8 meeting will conclude with anything that is destabilizing to the U.S. dollar over the short term, even if the longer term role of the dollar is at risk. We look for the dollar to maintain a firmer bias in a generally lethargic market environment this week."

Brown Brothers Harriman added "the bottom line is a new international reserve currency cannot be artificially created overnight, or even in a decade."

The U.S. dollar was pushing up against Asian currencies like the Korean won and Malaysian ringgit.

Japanese government bonds ticked higher with the lead futures up 0.10 at 138.54 points and the yield on the 10-year note down one basis point at 1.31%.

Spot gold was down $2.15 from London Friday, at $930.10 a troy ounce, with all eyes on the U.S. dollar. "Gold prices are vulnerable to a deeper correction in the short-to-medium-term," said James Moore of TheBullionDesk.com.

LME three-month copper was down $36 at $4,944 a metric ton.

Markets as a whole were still closely watching oil prices with David Moore, commodities strategist with Commonwealth Bank of Australia, saying Nymex crude may drift lower in the coming week. The market for now was shrugging off an announcement by Nigerian rebels Sunday they had launched a fresh attack on an oil facility run by Royal Dutch Shell PLC in the Niger Delta.

-Rosalind Mathieson, Dow Jones Newswires; +65-6415-4140; rosalind.mathieson@dowjones.com

TALK BACK: We invite readers to send us comments on this or other financial news topics. Please email us at TalkbackAsia@dowjones.com. Readers should include their full names, work or home addresses and telephone numbers for verification purposes. We reserve the right to edit and publish your comments along with your name; we reserve the right not to publish reader comments.

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(END) Dow Jones Newswires

July 05, 2009 23:04 ET (03:04 GMT)


Copyright 2009 Dow Jones & Company, Inc.

Lack of clear direction hurts currency funds

Mon, Jul 6 2009, 03:26 GMT
http://www.forexlive.com

It seem some of the world's biggest currency funds cant get direction right. FX Concepts Inc have reported a loss of 5.4% in this year's first 5 months and John W.Henry & Co. has lost 2%. A lack of clear direction and markets being pulled in opposing directions the contributing factors.

The opinions and analysis offered on Forexlive are for educational purposes only and clients and prospects are advised to carefully consider the opinions and recommendations offered by the analysts and to use the analysis and opinions in conjunction with the client and/or prospects own independent analysis.

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