[B]Market Review - 08/06/2013 [I]01:30GMT[/I]
Dollar rises broadly on short covering after U.S. jobs data[/B]
The greenback rebounded strongly against other currencies on Friday as the report showed the U.S. jobs creation was in modest pace, supporting market speculation that the Fed may begin to taper its asset purchases some time possibly in September.
Versus the Japanese yen, the pair went through a volatile session Friday. Although the greenback recovered from Thursday’s low at 95.90 to 97.52 in Asian morning, decline in Japanese stocks triggered another wave of broad-based yen buying, price penetrated said 95.90 support to 95.55 before staging a recovery to 97.24 at European open, however, the pair dropped sharply in European morning due to disappointment of an increase of only 1% of domestic stocks to 12% from 11% by Japan’s GPIF.
Dollar hit a fresh 5-week low at 94.98 after the release of slightly better-than-expected U.S. non-farm payrolls data (175K versus the forecast of 170K). Price then rose strongly in New York morning on short covering due to dollar’s broad-based strength and rallied to a high of 97.80 before stabilising in U.S. afternoon.
Japan Government Pension Investment Fund (GPIF) said in the scheduled briefing ‘GPIF to change allocation of domestic bonds to 60%; GBIF to change allocation of domestic stocks to 12% from 11%; change allocation of foreign bonds to 11% from 8%; change allocation of foreign stocks to 12% from 9%; lower allocation of domestic bonds to 60% from 67%.’
Although the single currency edged lower to 1.3224 in European morning, price rebounded briefly to 1.3285 in New York morning, however, dollar’s broad-based strength pressured the pair to 1.3191 before staging a recovery to 1.3243 due to the rally in eur/jpy.
The British pound traded narrowly below 1.5618 in Asian morning and edged lower to 1.5556 in Europe due to cross selling of sterling versus euro. Later, dollar’s strength sent the pair further lower to 1.5488 in New York morning before staging a recovery.
In other news, Germany’s Bundesbank cut its 2013 growth projection to 0.3% from the 0.4 % predicted in December, and said the economy would grow by 1.5% in 2014, down from the previously-estimated 1.9%. ECB’s Nowotny said ‘underestimated downturn in euro area; euro area is weak spot for global economy; core countries are losing momentum; hope to reach trough in middle of year.’
On the data front, U.S. unemployment rate in May increased to 7.6% from previous month’s reading of 7.5%, worse than the expectation of 7.5%. German Industrial production in April came in at 1.8% m/m n 1.0% y/y, better than the expectation 0.0% n -0.8% respectively.
[B]Data to be released next week : [/B]
Australian market holiday, Japan GDP, current account, economic watch DI, Swiss unemployment rate, retail sales, France industrial production, manufacturing production, Italy industrial production, Euro zone Sentix investor confidence on Monday. China and Canada are closed for market holiday.