The Dollar fell against the Yen on Wednesday, as investors remained bearish on the US currency amid concerns about the health of the U.S. economy and financial system. The dollar recovered from the day’s lows however, in part bolstered by news that regulators have lifted capital limits on mortgages that Fannie Mae and Freddie Mac may purchase. That could free up as much $200 bio in liquidity for the stricken mortgage market. Still, the news was not enough to completely offset the overall negative market sentiment on the Dollar, as US interest rates were still seen heading lower even after a 75 bp easing to 2.25% by the Federal Reserve on Tuesday. Analysts say the outlook for the Dollar remains weak, with lower interest rates set to further cut the currency’s yield appeal Sterling, meanwhile, fell as minutes from the Bank of England’s Monetary Policy Committee showed two of nine policymakers favored a rate cut this month, which added to speculation that UK rates are heading lower soon.
News and Events:
The Dollar fell against the Yen on Wednesday, as investors remained bearish on the US currency amid concerns about the health of the U.S. economy and financial system. The dollar recovered from the day’s lows however, in part bolstered by news that regulators have lifted capital limits on mortgages that Fannie Mae and Freddie Mac may purchase. That could free up as much $200 bio in liquidity for the stricken mortgage market. Still, the news was not enough to completely offset the overall negative market sentiment on the Dollar, as US interest rates were still seen heading lower even after a 75bp easing to 2.25% by the Federal Reserve on Tuesday.
Yesterday, UsdJpy was down 1.21% at 98.65, trimming losses following the Fannie and Freddie announcement. It hit a 13-year low 95.74 on Monday. UsdChf was also down 0.29% at 0.9967, way above record lows at 0.9639 from Monday. EurUsd was down 0.11% at 1.5637, down from the intraday high 1.5785. EurUsd touched a record peak of 1.5904 Monday.
Analysts say the outlook for the Dollar remains weak, with lower interest rates set to further cut the currency’s yield appeal. In its statement on Tuesday, the Fed indicated it could cut rates again, even though two voting members dissented against the depth of the latest move. The rate futures market has priced in a 58% chance of a 50bp cut to 1.75%, down from about 94% earlier. Tuesday’s rate cut is the latest in a series of emergency measures undertaken by the Fed to prevent the credit crisis from escalating. On Sunday, the Fed cut its discount rate by a 25bp to opened up discount window lending to major investment banks, a tool not used since the Great Depression. But these measures did little to ease the market’s concerns.
Sterling, meanwhile, fell as minutes from the Bank of England’s Monetary Policy Committee showed two of nine policymakers favored a rate cut this month, which added to speculation that UK rates are heading lower soon. GbpUsd fell as low as 1.9803 before trading back up at 1.9833, down 1.27%.
UsdCad gained 2.23% to 1.0119 on concerns that problems in the US economy will seep through to the Canadian economy.
Today’s Key Issues (time in GMT):
00:00 USD Market Holiday DKK, JPY, NOK
09:30 GBP February Retail Sales -0.2% vs 0.8% (MoM)
09:30 GBP February Retail Sales 3.6% vs 5.6% (YoY)
09:30 GBP February Public Finances (PSNCR) � 2.15B vs �-22.11B
09:30 GBP February Public Sector net Borrowing �2.5B vs �-14.13B
12:30 USD March 15th, Initial Jobless Claims 360k vs 353k
12:30 CAD February leading Indicators 0.1% vs 0.2%
14:00 USD March Philadelphia Fed Business index -18.3 vs -24
14:00 USD February leading Indicators -0.3% vs -0.1%
The Risk Today:
EurUsd Euro posted a new all-time high 1.5904 on Monday, confirming medium term trading range 1.5400 � 1.6000. Initial support hold 1.5528 (23.6% retracement of 1.4311-1.5904 advance) close to Friday low. Psychological 1.5000 level marks strong key support before 1.4500 pivot point. Initial resistance hold 1.6000 key level.
GbpUsd Cable advanced as high as 2.0398 last week, 2 � month high. Further strength might open the way toward 2.0577 3-month high. Psychological 2.0100 support has been broke down this week. Renewed pressure pushed through 2.0000 and reopen the way down to 1.9337 January low and 1.9105 (50% retracement of 1.7049 � 2.1162 advance).
UsdJpy It remains weak in the last 4-week down trendline. Recent break through 100 Pivot marks resistance. Bottom support holds 95. On the Upside, only a return over 100 may open the way up to 110.10 strong (Trendline) resistance and mid January double top ahead of 111.92 early January high. Initial support holds 95.74 Monday low.
UsdChf Market remains weak, having broke down through 1.0000 last Friday psychological level. Further weakness open way down again to 0.9639 Monday low. Uptrend would only return over 1.0000 and 1.0200 resistances. Early January double top 1.1191 marks strong resistance.
Resistance and Support:
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland