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Asian Session- Dollar Continues to Hold as Asian Currencies Come Under Some Pressure
Market Brief
The emphasis yesterday was on the pound and partially on the Australian dollar. Both declined versus the greenback comforting the latter’s newly gained vitality. The US dollar’s vigor also took its source from the continued rise in price of crude oil which came yesterday within reach of $127 a barrel. The uncertainty about the price of the crude has attracted many investors to take positions in dollars. The effect has been to drain capital from other currencies. In Australia the trigger was the weaker than expected wage price index which rose 0.9% in Q1. Although up to 4.1 % for the year, the figure published yesterday was well below the expectation for what has been dubbed a formidable stable flow of growth. The Aussie climbed before coming under pressure and closing .9371.
Around Asia the currencies faltered. Whether in Malaysia, Singapore, Thailand, and even India, the currency fell versus the dollar. The decline was attributed to a lackluster performance of the Asian stock markets, where financial came under considerable pressure along with the tail end effects of the earthquake that has hit China.
In Europe the fall of the pound was also notable. There was a noxious mix of data showing slowing economic pace along with rising prices. There was an initial rise of the pound as the increasing pace of inflation rendered a rate hike more probable but the rally ran out of steam as investors put more emphasis on the poor showing of the economy that would warrant a fall in rates.
The dollar’s support was also internally driven. It is assumed by many analysts that the period of declining rates is over. Moreover there are signs that the Fed is tempted to intervene more rapidly in the markets before any burst of a credit bubble. This is going against the credo of Greenspan who believed that monetary policy can not be of any use till a bubble has burst. The dollar’s new gained is nonetheless still wobbly. Any newly released data that would intimate a slowdown could bring about a turnabout in the trend. There was some hint of this yesterday as financial in the NYSE came under pressure as more downgrades related to the subprime crisis were announced. This being said six of the ten sectors managed gains, led higher by Energy (+1.2%). Major news out on the day was the retail sales, showing a gain of 0.5%, ex autos, above the 0.2% expected. Gasoline sales were actually down, so crude price inflation was not the cause for the higher spending. Wal-Mart's (-2.4%) was lower post its numbers, as they beat expectations, but profit-taking was in order for a stock up 19% this year.
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