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21/07/2008 | | | |
00:41 BST | | | |
| High | Low | Close |
USD/JPY | 106.99 | 106.26 | 106.97 |
EUR/USD | 1.5879 | 1.5807 | 1.5848 |
EUR/JPY | 169.49 | 168.4 | 169.49 |
GBP/USD | 1.9993 | 1.9912 | 1.9989 |
AUD/USD | 0.9739 | 0.9698 | 0.97 |
NZD/USD | 0.7663 | 0.7609 | 0.7612 |
USD/SGD | 1.3552 | 1.352 | 1.3536 |
USD/THB | 33.42 | 33.32 | 33.35 |
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21 July 2008
Asia Open / Overnight Highlights
- Fed's Stern states that the Fed can't wait for the end of the crisis to raise rates.
- Crude oil, $129.00...-$0.29.
- ECB's Draghi said that inflation risks have heightened, suggesting that there may be a need to use monetary tools to "lean against the wind".
- Premier Wen called for firm controls on price pressures, but warned that China still faced serious economic challenges; he added that foreign trade policy will be fairly stable addressing concerns about slowing foreign demand, rising input costs and export curbs.
- China's economic planning agency said that it will step up checks on FDI to curb hot inflows; NDRC has ordered that large FDI be approved by it centrally rather than at the local levels - a stricter implementation of the existing regulations.
- China's Sinopec will be in a JV with Vietnam's Petrolimex to build a $4.5 bln petrochemical complex in Vietnam's central region.
- According to the economics ministry, Taiwan investments in mainland China in June rose 82.1% from a year earlier to $984.0 million. China is favourite investment destination of Taiwan companies despite the political friction between the two countries.
- Indonesia' s Finance Ministry has deferred the planned issuance of the first sukuk bonds from Oct to Nov due to lower business activity expected during the Muslim fasting month. Up to some $1 bln is expected to be issued.
- Indonesia may cut export tax for palm oil from 20% to 15% on easing global palm oil prices.
- In an attempt to inject some fresh vigour into the energy and mining sectors, the Indonesian govt has appointed two new heads for policy making departments; Evita Legowo replaces Luluk Sumiarso as the director general of oil and gas while Bambang Setiawan is now director general of mineral, coal and geothermal, replacing Simon Sembiring.
- FT: India's Congress Party is trying to garner support for the govt; the confidence vote has the former leftists allies of the govt up in arms to topple the existing govt over the nuclear deal with the US.
Currencies: EUR/USD has ended an eventful week confined to a relatively tight trading range, still between 1.5800 and 1.5900. The tight range is a modest surprise considering the jump in Germany's May PPI, but highlights the lack of conviction in the market. While flows were non-descript, those who were involved reacted to better than anticipated Citigroup earnings and the coincident uptick in equity markets by moving to the bottom of the range. While there is little doubt that sovereign names have interest, they were obvious by there absence, with bids under the intraday range and offers well up in the 1.5900 price range.
USD/JPY did not disappoint or surprise anyone today. With the bounce in equities that followed on from the more positive than negative series of earnings reports, JPY was softer across the board. But, as equities failed to sustain early strength and with a holiday in Japan on Monday, activity was anything but inspiring. Prices were confined to a relatively tight range, where little in the way of price discovery can be found, extending from near 106 to near 107, ending near the upper end of the range.
GBP suffered modestly in reaction to the generally firm USD that has been supported by the climb in equity prices and the nearly unchanged crude oil price. EUR/GBP spent the day nearly unchanged once again and GBP/JPY rallied, which was more a reflection of the broad based retreat in JPY than any particular demand for the cross.
AUD/USD trading range may have been the tightest on the day. While there was little in the way of interest shown on either the buyside or sell side, prices were confined to a range that extended from 0.9700 to 0.9740. With a trading range like that, it is difficult to write about flows.
Bonds: The bearish fervor continued into Friday as stocks as well as market sentiment were buoyed by better-than-expected earnings out of Citigroup (as it shrugged off the worse-than-expected results out of Merrill Lynch after the close on Thursday). With a barren economic calendar and no Fed-speak to guide price action, treasuries remained at the whims of the ebb and flow of equities into the close to end weaker with the front-end underperforming as bearish sentiment built into the close. Adding to the bearish price action were decidedly bearish comments from Fed's Stern just before the close. By the close, 2s @ 2.62% (off by 13bps), 10s @ 4.08% (off by 9bps) and 2s30s @ 204bps (flatter by 8bps).
- Agency spreads: 2s, Freddie/Fannie, -4.00 bps/ -3.25 bps, 5s, Freddie/Fannie, -4.75 bp/-4.00bps, and 10s, Freddie/Fannie, -3.50bps/ -2.00 bps.
- Interest rate swap spreads: 2s @ 100.75...+1.00 bps, 5s @ 99.25...+0.50 bps, 10s @ 76.00...+0.25 bps.
Equities: Stock indices ended mixed as most stocks declined led by weakness in the technology sector after both Google and Microsoft posted disappointing Q2 results. The intraday price action was choppy and erratic but the overall indices outside of the tech-heavy Nasdaq went out fairly close to previous levels. Dow was up 0.44% (+49.91pts). S&P inched up 0.03% (+0.36pts) while Nasdaq suffered a loss of 29.52pts (-1.28%).
Asia Outlook: 'Mixed' would be an apt term to describe the mood in Asian markets in trades today. Wall Street was certainly mixed and Asian technology counters could be weighed while Financials get a boost from the relief buying triggered by Citi. Oil has also positioned itself softer, taking some heat off inflation woes in the region. While there could be some support for Asian currencies, we note that hawkish comments from the Fed are likely to limit any downward impetus in USD/Asians in trades today. Tokyo close today (Ocean Day holiday) suggests that some volatility from thinner volumes could be seen though JPY crosses topping off - a sign that fresh risk-taking could be curtailed - indicate that there will however be restraint in trades and aggressive bets do not seem likely. Cautious consolidation looks like the mood in the markets today.
NORTH ASIA
USD/KRW: USD/KRW may see some choppy trades though prices are bound to consolidate. The steady climb in the dollar should lift the pairing. Expect however that the authorities sell heavily from time to time to keep bullish moves in check. Intraday range of 1007-1019 looks likely for now. Prices in the NDFs opened at 1015.5-1016.0; traded at 1015.5-1016.5 before closing at 1015.0-1015.5. Moderate volume was cited.
USD/CNY: With oil headed lower and Premier Wen stressing on broader economic ri