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By XE Market Analysis August 28, 2013 2:42 pm
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    XE Market Analysis: Asia - Aug 28, 2013

    The dollar was mixed in N.Y. trade on Wednesday, ultimately gaining on the euro CHF and yen, while losing ground to sterling and the dollar bloc. Cable initially fell, then rallied sharply after BoE Governor Carney's speech. It was basically a re-emphasis of the forward guidance announce made back on Aug-7, as there was a bit of disappointment that Carney did not push back aggressively against market rates. Markets were on guard for U.S. military action in Syria, as U.S. officials said Syria was "past point of return". It remains to be seen what market reaction will be to such an event. On the calendar, June pending home sales were weaker than expected, while on Thursday, weekly jobless claims are on tap, along with the second look at Q2 GDP.

    [EUR, USD]
    EUR-USD hit intra day sell-stops at 1.3335, taking it to lows near 1.3315. A number of Continental names were reportedly good sellers, though talk of sovereign bidding interest into 1.3300 has been heard, which may put a floor under the euro for now. The move could have been prompted by reports that NATO said Syria's chemical weapon attack cannot go unanswered. EUR-USD held the bottom of the range. Last week's low near 1.3298 remained intact as good buyers emerged at 1.3305 intra-day lows. Another weak U.S. data release encouraged short covering by EUR traders that are playing the range. This range-bound theme could potentially continue until the latter part of next week when the ECB policy meeting is due and then Friday's NFP release.

    [USD, JPY]
    USD-JPY posted a modest recovery in Europe. The dollar pairing met strong support ahead of 96.80 overnight and entered the European session back above 97.00. The pick up in USD-JPY extended to the 97.85 region in N.Y. and was in tandem with demand for the JPY crosses and a modest recovery in U.S. stocks. Speculation that month-end activity could be more favorable for the dollar in the latter part of the week, might have provided some support.

    [GBP, USD]
    GBP hit intra-day lows, then rebounded as BoE Governor Carney gave his first speech since forward policy guidance was unveiled. Carney defended the Bank's stance and put into perspective the upward move in long-term yields, stating that the main common driver is speculation that the Fed will soon reduce the pace of its asset purchases and it is not surprising that yields in other countries were affected. Carney acknowledged that movements have been reinforced by recovery expectations in the U.K., but said that a rise in yields over the long-term is consistent with the commitment to price stability. Carney said the Bank would welcome a move down in unemployment to 7% earlier than expected, like the market is pricing in, but said there is only a one in three chance of this happening and he did not think interest rates will rise sooner than it had outlined. Cable hit lows of 1.5428 and then surged to 1.5550.

    [USD, CHF]
    CHF is holding steady on risk aversion. Global equity market losses since the start of the week reinforced a move back into the CHF, leaving EUR-CHF under 1.2300 and USD-CHF under 0.9200. Further demand for the CHF is being absorbed by profit taking activity. EUR-CHF has met good demand into 1.2280 since the early part of last week from Swiss names, while USD-CHF buyers are noted into the 0.9150 region. The cross was steady through the N.Y. session, though USD-CHF managed modest gains over 0.9230.

    [USD, CAD]
    USD-CAD slipped back toward intra day lows early in the session, basing at 1.0475. Standing bids were in place at 1.0470, while offers were placed at 1.0530. Firmer oil prices were supportive of the CAD, though with range trade largely ensconced, the pairing rebounded to 1.0495, before settling in around 1.0480.

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