[B]Market Review[/B] - 03/12/2013 [I]22:05GMT [/I]
[B]Dollar drops on Tuesday on long liquidation[/B]
The greenback turned broadly lower against the other major currencies on Tuesday, as market participants locked in profits after Monday’s unexpectedly strong U.S. manufacturing data strengthened the dollar.
Versus the Japanese yen, although U.S. dollar rebounded from 102.83 in Asia and then penetrated Monday’s high of 103.13 to a fresh 6-month peak at 103.38 on expectations that the Bank of Japan will have to expand its stimulus program in order to meet its target of 2% inflation by 2015, falling in Nikkei futures in European trading triggered broad-based liquidation in recent massive short yen positions and dollar later tumbled to 102.38 in New York morning and then further to 101.97.
During the day, the single currency dropped one-tick below Monday’s low at 1.3526 to 1.3525 in Asian morning, however, active cross-buying of euro versus yen lifted price ahead of European open and euro later rallied to 1.3593 and then 1.3613 in New York session on dollar’s broad-based weakness before easing. Eur/jpy rose above last Friday’s high of 139.71 to a fresh 5-year peak at 140.03 before dropping to intra-day low of 138.70.
Although cable traded sideways inside a relative narrow range of 1.6347-1.6365 in Asia, price rose in tandem with euro in early European trading and then ratcheted higher to 1.6437 after data showed that activity in the U.K. construction sector expanded at the fastest rate in six years November, however, failure to penetrated Monday’s 2-year peak at 1.6443 prompted long-liquidation and cable retreated to around 1.6390 in New York opening and then fluctuate inside 1.6390-1.6437 for rest of the session.
U.K. construction PMI rose for the seventh month in a row in November and came in at 62.6, versus expectation of 59.0 and 59.4 in October and was the highest level since August 2007.
In other news, Reserve Bank of Australia (RBA) left its benchmark interest rate unchanged at a record low 2.50% on Tuesday, in line with expectations. RBA Governor Glenn Stevens said in the statement ‘policy setting appropriate; sees below trend growth persisting near term; A$ still uncomfortable high; lower A$ likely to be needed for economy; public spending to be quite weak; inflation consistent with medium term target; housing and share markets have strengthened, positive for investment; effect of past easing still coming through.’
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Data to be released on Wednesday: [/B]
Australia GDP, China HSBC services PMI, Swiss industrial production, U.K. RBC shop price index, services PMI, Germany services PMI, France service PMI, EU GDP, retail sales, service PMI, U.S. ADP employment, Trade balance, ISM non-manufacturing, new home sales, Fed releases Beige Book, Canada trade balance, import, export and BoC rate decision