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By XE Market Analysis October 2, 2013 2:09 pm
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    XE Market Analysis: Asia - Oct 02, 2013

    The dollar faded in N.Y. trade on Wednesday, as a softer ADP employment print weighed slightly, and a status quo ECB prompted EUR-USD short covering. The greenback's rise on Tuesday was largely undone today, as prospects for a drawn out U.S. government shutdown, and fears of a U.S. default, in just two weeks, weighed on sentiment, Equities turned lower, while Treasury yields were largely softer. Hopes for some sort of political deal later took stocks and the dollar off their worst levels, though it remains to be seen if the dysfunction in D.C. can be resolved quickly. On the economic calendar, the ADP headline came in at 166k in September, light of the 180k consensus.

    [EUR, USD]
    EUR shorts covered on ECB status quo. ECB chief Draghi maintained the easing bias and left the door open for more action if needed, stating that all instruments were available including the LTRO. However, he did not offer further comments on the recent debate over a potential LTRO later this year. After 1.3500 held the EUR moved into Tuesday's peak near 1.3590 on hedge fund demand. EUR-USD later touched session highs of 1.3607, though was quickly pushed back to 1.3585. Good offers were reported from 1.3620, and the move over 1.3600 prompted a decent wave of profit taking in general. Earlier, George Soros noted the EU crisis "was over" (we shall see). which may have had something to do with the euro's climb this morning. EUR-USD remained firm after the London close. At the same time however, pullbacks were shallow, and a N.Y. close over the figure may well portend further gains overnight. Otherwise, a drift back to 1.3550 might be in the cards.

    [USD, JPY]
    USD-JPY chipped away at bids between 97.30 and 97.20, on its way to 97.15 lows, which absorbed a good bit of downside dollar pressure due to EUR-USD's upswing. There was talk late Asia that institutional investors and semi-official entities would limit the downside ahead of more prominent support at 97.00. Buyers of the JPY crosses were also evident, with EUR-JPY, GBP-JPY and CHF-JPY demand going through, though there was an absence of Japanese interest and short term position traders were the main movers as the dollar faded.

    [GBP, USD]
    Cable was a tale of two central banks. An active Asian account was a persistent buyer into 1.6200 and below, while a Middle Eastern name has capped the advance from the 1.6250 area. It was widely thought that good size 1.6200 option maturities kept prices sticky in the low 1.62s, though after racing to 1.6261 highs on Tuesday consolidation can be expected. EUR-GBP is also at an important juncture and corporate hedging picked up after it moved into 1.2000 (0.8333) on the reciprocal rate yesterday.

    [USD, CHF]
    EUR-CHF ran up over 1.2265 in N.Y., after it found support ahead of 1.2200 on Tuesday. The thinking in the market is that a government shutdown will accelerate negotiations to avoid going into default in two-weeks. USD-CHF has also stabilised over 0.9050 after it found a strong bid under 0.9000 on during Tuesday's London morning.

    [USD, CAD]
    USD-CAD held near 1.0340 through late morning, after moving a step higher in Asia overnight. CAD weakness stepped up some in light of ongoing oil price weakness, but more likely the economic uncertainty coming from the U.S. shutdown, and looming near certain debt limit struggles. With some hopeful negotiation noises coming from D.C. in the afternoon however, and a rebound in oil prices, USD-CAD slipped back to 1.0324 lows. Bids are now noted from 1.0320.

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