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By XE Market Analysis June 4, 2013 2:26 pm
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    XE Market Analysis: Asia - Jun 04, 2013

    The dollar was marginally higher in N.Y. trade on Tuesday, though activity was choppy, and traded volumes on the light side. The only U.S. data on tap was the April trade report, and the marginally narrower deficit print appeared to help the dollar at the margins. EUR-USD moved to session lows of 1.3045 on talk of potential ECB narrowing of rate corridors, though quickly rebounded over 1.3085, as Wall Street dipped into the red. Markets will start to hear up for the ADP employment report on Wednesday, the ECB meeting on Thursday, and finally, the official May jobs report on Friday.

    [EUR, USD]
    EUR-USD moved to session lows of 1.3045, with talk of ECB narrowing rate corridors through rate cuts making the rounds. The ECB may prefer a narrower rate corridor to negative interest rates, according to MNI report, which suggested that the negative rate talk is a way to demonstrate the firepower of the ECB, but also that many council members argue that negative rates won't help with SME credit expansion and that a narrowing of the rate corridor may be a better rate cut strategy. Regardless, the EUR eventaully rebounded back over 1.3080 in light trade.

    [USD, JPY]
    USD-JPY broke back over 100.00 and extended to the 100.40 area after Monday's clear out to 98.85. The move lower was heavily influenced by stops as macro funds cut dollar longs. However, Japanese importers were aggressive buyers at the lows and were active in Asia. Japanese stocks also benefited from talk that the government growth stategy could be announced as early as tomorrow and could include measures that will encourage more oversea investment in stocks and bonds. N.Y. trade was quiet, with USD-JPY finding support into 100.00, while managing highs under 100.40.

    [GBP, USD]
    Cable edged back into 1.5320 following option related demand from the 1.5275 region. The pick-up in Cable also weighed a touch on EUR-GBP, which pulled back from over 0.8555 to the 0.8540 level. EUR-USD's inability to sustain higher levels also added some downward pressure, but overall the cross is well within the recent range. Yesterday's move lower met solid corporate demand ahead of 0.8500, while recent attempts to break higher have generally struggled from 0.8600 due to reserve management flows. Tomorrow may see more potential for GBP upside though, with the U.K. service sector PMI data due, and will offer a more complete snapshot of the U.K. economy.

    [USD, CHF]
    EUR-CHF headed back over 1.2400 in morning N.Y. trade. The move higher in the cross mirrored EUR demand elsewhere and it traded up from 1.2390 in early Europe to reach 1.2430. The cross plunged from 1.2465 to 1.2330 amid very heavy dollar selling after the U.S. ISM disappointment, which knocked USD-CHF from over 0.9600 towards 0.9400. It has also corrected to the 0.9500 area and helped the EUR-CHF tone, though it has also see flows of its own out of Frankfurt and Zurich from specs and light corporate flows.

    [USD, CAD]
    USD-CAD rallied marginally to 1.0330 from 1.0310 following the combination of smaller U.S. and wider Canadian April trade deficits. Reaction was muted, with CAD activity said to be light overall. The pairing spend the remainder of the morning edging over 1.0350, but flows reportedly stayed thin, and ranges narrow.

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