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By XE Market Analysis September 19, 2013 2:10 pm
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    XE Market Analysis: Asia - Sep 19, 2013

    The dollar stayed soft in morning trade, though managed to pick up some ground as the session continued. With the euro and pound in particular unable to take out overnight highs, EUR-USD and GBP-USD faded some in early afternoon dealings. USD-JPY was an exception, and remained firmer through the day, largely as flows out of yen and into emerging markets weighed on the yen. Equities were moderately lower, and Treasury yields a bit higher, perhaps as impact from the Fed's inaction on Wednesday ran its course, and weighed on risk taking sentiment. U.S. data releases handily beat expectations, with the Philly Fed index, leading indicators, and existing home sales all showing impressive gains. The better data likely helped the dollar in afternoon dealings.

    [EUR, USD]
    EUR-USD eased to N.Y. session lows of 1.3510, after failing to take out the prior London high. Following the better U.S. data this morning, the impact of the Fed's inaction on Wednesday may have nearly run its course for now. Euro longs will likely get nervous with an approach to 1.3500, and sell-stops are expected to be a factor just under the figure. ENough buying interest emerged however, to take the pairing back over 1,.3525 in afternoon dealings. Treasury yields moved above their earlier lows, while equities came under modest pressure, indicating risk levels may be easing some.

    [USD, JPY]
    JPY losses were exacerbated by emerging market inflows, according to conjecture amongst market sources. Markets were caught on the wrong foot by the Fed policy decision and this triggered a sea-change in sentiment, which lifted USD-JPY out of 97.75 toward 99.40 and EUR-JPY also cleared 2010 highs at 134.37, on its way to highs near 135.00. In Asia, it was emerging markets that posted the biggest foot print, particularly countries with current account deficits that are reliant on capital inflows. Some sources suspect that market positioning was influential and Fed risk ahead could still taper the rally.

    [GBP, USD]
    Cable was relatively firm ahead of good support at 1.6050-60 through the morning. The unexpected drop in U.K. retail sales worked off some of the froth on the GBP topside. Cable pulled back from 1.6130 compared with yesterday's N.Y. close near 1.6160, while EUR-GBP rebounded towards 0.8450. Both the dollar pairing and the cross met good flows against this minor correction. The flows were mostly from macro funds and reserve managers. Dollar gains picked up later in the day, eventually taking cable to 1.6023 lows. After yesterday's Fed outcome and the September BoE minutes any corrections should be seen as buying opportunities and longs are positioned for a move on 2013 highs over 1.6300.

    [USD, CHF]
    SNB's policy hand barely registered on the CHF, which maintained stable to firmer levels after yesterday's unchanged policy decision forced USD-CHF back into the 0.9100 region. The SNB left policy unchanged, which included the EUR-CHF lower limit at 1.2000. USD-CHF traded a narrow range in N.Y., basing under 0.9100, and managing highs near 0.9125. The pullback in risk taking likely limited USD-CHF's upside.

    [USD, CAD]
    USD-CAD eased under 1.0200 into the North American open, basing at 1.0183. Time spent under the figure was short however, with solid corporate and real money buying interest emerging. The pairing made its way steadily higher, eventually peaking over 1.0260 in early afternoon. Risk taking levels eased back from Wednesday's post-Fed spike, which may have weighed on the CAD some.

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