By: Barbara Zigah
Returning earlier gains, both the U.S. Dollar and the Japanese Yen declined in Asian trading today, as the volatility of China’s share prices rose, prompting investors to move back into commodity-linked, high yielding currencies. Currencies typically higher yielding, such as the Australian and New Zealand Dollars, have seen a great deal of movement as a result of the volatility on the Shanghai exchange; investors are watching China closely in an effort to determine whether or not China can help the global economies move out of the recession. As reported at 3:03 p.m. (JST) in Tokyo, the Euro traded at $1.4305 against the U.S. Dollar, holding relatively steady; however, against the Yen, the Euro traded at 134.77 Yen, a gain of .1% from yesterday’s late trade in New York. The Yen slipped versus the Australian Dollar, trading at 78.90 Yen, a loss of .4% though it had traded at 78.24 earlier in the day, following a drop in crude oil yesterday. The Australian Dollar also did well versus the greenback, trading at $0.8373, a rise of .4%.
Analysts suggest that investors will continue to watch the Shanghai markets, but are also waiting for additional positive data out of the United States to support the opinion that the American economy is improving. Specifically, investors are hopeful that consumer confidence will show continuing signs of improvement.
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US Dollar, Japanese Yen Showing Signs of a Turn as Surge in Consumer Confidence Fails to Impress
US Dollar, Japanese Yen Showing Signs of a Turn as Surge in Consumer Confidence Fails to Impress
To say it was an interesting day in the currency markets would be an understatement. The US dollar and the Japanese yen ended as the strongest of the majors, but they were well on their way to be the weakest during the European and early US trading session. Indeed, ahead of the release of US consumer confidence, carry trades were making headway and US stock market futures were rising in anticipation of strong results. In the end, the markets were correct in anticipating better results, but wrong on the subsequent fallout. In fact, shortly after the Conference Board announced that their measure of US consumer confidence jumped to a three month high of 54.1 from a revised 47.4, US stocks started to pullback from intraday highs, and the US dollar and Japanese yen rallied. These moves may suggest that optimism has hit an extreme, and with the DXY index holding above a trendline connecting the July 2008 and August 2009 lows, and many of the JPY crosses showing signs of reversal, we may be finally nearing the return of risk aversion. That said, I was beating this drum last week and got burned as a result, so I’ll be awaiting confirmation signals (such as trendline and neckline breaks in pairs like GBPUSD, GBPJPY, and EURJPY) before taking decisive action.
To say it was an interesting day in the currency markets would be an understatement. The US dollar and the Japanese yen ended as the strongest of the majors, but they were well on their way to be the weakest during the European and early US trading session. Indeed, ahead of the release of US consumer confidence, carry trades were making headway and US stock market futures were rising in anticipation of strong results. In the end, the markets were correct in anticipating better results, but wrong on the subsequent fallout. In fact, shortly after the Conference Board announced that their measure of US consumer confidence jumped to a three month high of 54.1 from a revised 47.4, US stocks started to pullback from intraday highs, and the US dollar and Japanese yen rallied. These moves may suggest that optimism has hit an extreme, and with the DXY index holding above a trendline connecting the July 2008 and August 2009 lows, and many of the JPY crosses showing signs of reversal, we may be finally nearing the return of risk aversion. That said, I was beating this drum last week and got burned as a result, so I’ll be awaiting confirmation signals (such as trendline and neckline breaks in pairs like GBPUSD, GBPJPY, and EURJPY) before taking decisive action.
Germany Import Prices Fall the Most in 23 Years
German import prices fell 0.9% in July amid expectations for a 0.8% drop, and price pressures are likely to remain subdued throughout the second-half of the year as economic activity falters. At the same time, the annualized rate slipped 12.6% from the previous year to mark the biggest decline since July 1986, while export prices slumped 3.6% from 2008. The data foreshadows a weakening outlook for price growth and the European Central Bank is likely to maintain a dovish policy stance going forward as growth and inflation deteriorates.