[B]Market Review - 18/06/2013 [I]22:24GMT[/I][/B]
[B]Dollar rises against yen ahead of Fed rate decision[/B]
The greenback strengthened against the Japanese yen on Tuesday ahead of the Federal Reserve’s policy announcement on Wednesday as traders bet the central bank may imply it will soon reduce its bond buying program.
Versus the Japanese yen, the greenback edged higher in Asian morning on dollar’s broad-based strength and rose above Monday’s top at 95.22 to 95.44 in European session. U.S. CPI and housing data supported the pair and price climbed to 95.77 in New York morning before retreating to 95.05 in U.S. afternoon.
U.S. CPI in May came in at 0.1% m/m and 1.4% y/y, versus the forecast of 0.2% and 1.4% respectively. U.S. housing starts number in May was 0.914M, less than the expectation of 0.950M. Building permits in May came in at 0.974M, versus the forecast of 0.975M.
The single currency went through a roller-coaster session on Tuesday. Although euro edged lower from Monday’s top at 1.3382 in Asia and fell sharply to an intra-day low of 1.3325 in European morning after the dovish comments from ECB’s Draghi, cross buying of euro versus other currencies pushed the pair to 1.3399 but failure to penetrate option barrier at 1.3400 prompted profit-taking and price retreated to 1.3338 in New York morning. However, renewed buying interest emerged and the pair penetrated 1.3400 to a 4-month top at 1.3416 before stabilizing in U.S. afternoon.
ECB’s President Draghi said ‘do not think materially challenged in ability to deliver price stability by low level of interest rate; euro zone economy still in phase of adjustment; recent survey data suggest some improvement, but from low levels; monetary policy has regained sterling positive development.’
Earlier in European morning, the single currency was supported after the release of German ZEW economic sentiment and current condition, which came in at 38.5 and 8.6, versus the forecast of 38.1 and 9.5.
The British pound edged lower in Asia and dropped below Monday’s low at 1.5680 to 1.5663 in European morning due to cross selling of sterling versus euro. Later, despite brief bounce to 1.5709 after the release of U.K. economic data, the selloff of eur/gbp sent the pair further lower to 1.5565 in New York morning before staging a strong recovery to 1.5656 in U.S. afternoon on short-covering.
U.K. CPI in May came in at 0.2% m/m and 2.7% y/y, higher than the forecast of 0.1% and 2.6% respectively. U.K. RPI in May came in at 0.2% m/m and 3.1% y/y, same as the expectation. U.K. ONS house price in April was released at 2.6% y/y, higher than the expectation of 2.5%.
[B]Data to be released on Wednesday: [/B]
New Zealand current account, Australia Westpac leading economic indicator, Japan export, import, trade balance, U.K. BOE MPC vote, Swiss ZEW index, Canada wholesale sales, U.S. rate decision.