[B]Market Review[/B] - 01/10/2013 [I]22:10GMT[/I]
[B]Dollar pares losses after ISM manufacturing data[/B]
The dollar weakened against other major currencies on Monday as concerns over the economic impact of a U.S. government shutdown weighed on investor demand for the greenback, however, data showed that the U.S. manufacturing sector expanded at the fastest rate since April 2011 last month and dollar pared earlier loss in New York trading.
U.S. government went into a partial shutdown after Congress failed to reach a deal on a budget for the new fiscal year. Republicans have insisted on delaying the implementation of President Obama’s health care reforms as a condition for passing the budget.
During the day, although the single currency rose to a fresh near 8-month peak at 1.3588 in early European trading, profit-taking pressured price lower from there and euro dropped to 1.3535 after EU’s release a lower than previous manufacturing PMI data, then 1.3517 in New York morning on dollar’s broad-based rebound before stabilising.
In the eurozone, a report showed that the final reading of the bloc’s manufacturing purchasing managers’ index came in at 51.1 in September, unchanged from the preliminary estimate, but below August’s 26-month high of 51.4.
Versus the yen, dollar went through another volatile session against the yen on Tuesday. Despite an initial gain to 98.73 on the back of rising Nikkei 225 index in Asia, dollar’s broad-based weakness pressured price to a session low of 97.65 in Europe before staging a strong rebound on short-covering. The pair later climbed back to 98.30 in New York morning after release of upbeat ISM manufacturing data before easing and then traded sideways for rest of the session.
The British pound strengthen after finding support at 1.6181 in Asia and then rose above Monday’s high of 1.6203 to a fresh 8-1/2 month high of 1.6260 in early European trading before retreating, dollar’s broad-based rebound later pushed price lower in New Yok morning and cable fell to 1.6190 before stabilising.
In commodity currency, the Australian dollar rallied after RBA kept monetary policy unchanged on Tuesday, surged from 0.9289 to 0.9435 before profit-taking emerged. RBA kept its rate unchanged at 2.50% and said ‘monetary policy appropriate; lower A$ would help economy; see below trend growth continuing in near term; A$ still about 10% below its April level despite recent rise; unemployment rate has edged higher; pace of borrowing still subdued; sees improvement I household n business sentiment though too soon to judge how persistent this will be.’
In other news, BoE’s Tucker said ‘regular stress testing of U.K. banks would improve BoE supervision, confidence in banks; stress testing would improve BoE’s accountability to parliament, create healthy debate about supervision objectives; Basel capital accord could be recast to differentiate between going-concern and gone-concern requirements; banking regulators should address international distribution of losses in a crisis.’
[B]Data to be release on Wednesday: [/B]
Australia trade balance, building approvals, U.K. PMI construction, EU PPI, ECB rate decision, U.S. ADP employment.