Dukascopy analytic desk report Published: 26 October 2009 at 14.39 GMT Previous session overview A rise in Asian stocks as well as talk of Chinese reserve diversification pushed the dollar lower in Europe Monday. The euro was the main beneficiary with the single currency being helped as fears of verbal intervention subsided. An upturn in Asian stock markets, with the Nikkei Index rising 0.8% on the day, had already weakened support for the dollar earlier Monday before a report appeared in a Chinese newspaper backed by the Peoples Bank of China suggesting that the bank needs to diversify more of its reserves in the euro and the yen. Although the report was later denied as a private view rather than official bank policy, the story had already hurt the U.S. currency, which remains highly vulnerable to sentiment that it is losing its position as the primary reserve currency. As the dollar fell, the euro was helped to settle above USD1.50 after European Central Bank governing council member Christian Noyer failed to comment on the single currency's recent strength in an overnight speech in Singapore. USDJPY making steady progress through exporter offers reported above JPY92.00, the dollar tracking higher in a risk-related trade as US stocks build early, robust gains. Sterling has already fallen by 4 cents against the dollar since last Friday's news that the U.K. economy contracted by 0.4% in the third quarter rather than staging the recovery from recession that most economists had expected. The data suggest that the U.K.'s recovery will lag behind those of other major economies and that the Bank of England will need to continue monetary easing well after other major central banks. Market expectation The euro's rise over the last few weeks could pose a threat to the economic recovery of some parts of the euro zone. As a result, the market has been braced for officials to start talking the euro down. Analysts said Noyer's silence on the subject suggests that official tolerance of the euro strength might well be higher than the market anticipated. Pound stops triggered through USD1.6360, while the earlier reported stops through stg0.9185 also tripped. Rate edges on to USD1.6367. Technical resistance now seen placed at USD1.6380 (minor channel top and rising) ahead of stronger level at USD1.6420 (38.2% USD1.6694/1.6251). Tech traders that went long earlier seem to have take profit offers placed around USD1.6410, traders say. USDJPY very muted flows despite the JPY91.70/95 range seen over the last hour and change, this pair also very quiet after modestly better action overnight. In Asian hours, yen saw modest buying in the wake of the PBOC analyst report that suggested the CB would increase accumulation of yen and euros, though most quickly note such talk is not new or unforeseen, the yen demand offering a quick excuse for short-term specs to take some money off the table. Talk earlier suggested dollar demand interest down at JPY91.50 with offers around JPY92.30. More recent chatter now adds some exporter interest above JPY92.00. Most important events of the day Oct 26 | Count. | Event | For | Unit | Imp. | Act. | Cons. | Prev. | 00:00 | AT | Market Holiday - National Holiday | | | | | | | 00:00 | NZ | Market Holiday - Labour Day | | | | | | | 00:00 | IE | Market Holiday - Bank Holiday | | | | | | | 00:00 | EU | ECB Governing Council member Noyer to attend forum on "The Aftermath of the Crisis: Times of Dialogue and Opportunites" | | | | | | | 00:00 | WLD | World Bank publish Eastern European Report | | | | | | | 00:30 | AU | PPI | Q3 | % q/q | | +0.1 | 0.3 | -0.8 | 01:30 | AU | PPI | Q3 | % q/q | | | | | 01:30 | AU | PPI | Q3 | | | | | | 07:00 | DE | GFK Consumer Sentiment | Nov | Index | | 4.0 | 4.5 | 4.2 | 08:00 | ES | PPI | Sep | %y/y | | -5.4 | | -5.5 | 08:30 | SE | Trade Balance (nsa) | Sep | SEK bn | | | | 6.1 | 13:10 | CA | BoC Governor Carney to give speech on "The Future of Financial Regulation" | | | | | | | 17:35 | GB | BoE MPC Board member Posen to give speech at CASS Business School | | | | | | |
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