[Market Briefs]
- Fed"s Krozner: Fed to act as necessary to ensure smooth US markets; Should
weigh economic effects market-pricing problems; US equity markets seeing
greater volatility; price discovery broke down in structured credit markets - Chicago Fed Sep Natl Activity Index -0.45; -0.68 In Aug
- IMF Rato: sees risk of abrupt USD fall; sees risk of rapid EUR appreciation
with negative growth impact; sees US slowdown but no recession - Tsry Paulson: Not all capital markets functioning normally yet; IMF needs
meaningful forex surveillance; emerging markets should take more
responsibility in world finance - Weber: ECB Will Do What’s Needed To Maintain Price Stability; All Parties Must
Act Responsibly On Inflation; German Prices Rising Across The Board; Risk That
German HICP Might Rise To 3% By Yr-End; German Inflation To Rise Further Until
End '07; Somewhat Concerned About Strong German Inflation Rise; Must
Counteract Rising German Inflation - HK Financial Secy: Hong Kong inflation now moderate
[Looking Ahead - Economic Data]
[GMT Release Per EST/ACT Prev Median Range ]
No major releases
[Looking Ahead - Events, Other Releases]
No major events
[Currency Summaries]
[USD/JPY] opened New York around 113.70, traded up to 114.49 at the high, and
closed around 114.15, a rare up day for the greenback, its first since October
5th. It was a combination of post- G7 hangover, as well as post- overnight
equity collapse relief, as US markets held in, much to most prognosticators
chagrin. The Dow closed up 0.22%, and the NASDAQ up 0.98% having chopped either
side of those levels all day, with the Dow up 0.5% at one point. EUR/JPY was
understandably twitchy throughout the session, but traded with an upward bias as
it became apparent that the expected equity meltdown was not materializing.
EUR/JPY opened the NY session around 161.00, traded up to 162.24, whipped around
in a 161.05/162.20 range through lunch time, settled into 161.50/162.10, and
closed at 161.75.
[EUR/USD] opened NY around 1.4160/65 soared to 1.4192 on intra-day profit
taking, collapsed to 1.4126 on incessant selling from the CTA crowd, then ground
higher as US equity markets clung on to late morning gains, and closed at
1.4165. The rally was a relief rally, relief that the expected US equity market
meltdown did not materialize, and that the Dow closed up 0.22% and the NASDAQ up
0.98% having chopped either side of those levels all day. EUR/JPY was a primary
mover, a post- G7 focus, having collapsed to 160.50 just before NY opened, and
surging from its 161.00 opening low to 162.10 at its peak, before closing at
161.90. Traders were worried about a market collapse similar to Asian markets
overnight, relief that US markets held was today’s central theme.
The market slipped back into a grinding sideways chop, 1.4280/1.4300 and closed
around 1.4290. Traders are being cautious ahead of tomorrow’s G7.
[GBP/USD] opened in New York trading 2.0320 and found an immediate bid tone as
short-term speculative accounts looked to book profits following the sharp
overnight USD rally. The initial bounce took the pair as high as 2.0355 ahead of
the US equity open from where a fresh round of selling emerged from longer-term
names. The morning sell-off in equities sparked additional carry liquidation
sending the pair in a steep decline to fresh daily lows by 2.0260 into the
London fix. However, overextended hourly technicals combined with a rebound back
to opening levels in the stock market, prompted a relief rally with the pair
setting to close off of the lows by the 2.0300 figure. Key levels to watch above
and below are 2.0355 and 2.0247 respectively
[USD/CHF] opened in NY around 1.1715, well above the 1.1600 trend lows scored
o/n on left-over selling from Friday"s heavy losses on Wall Street. Failure to
break 1.1600 support and waning equity market selling pressure in the US carried
the USD/CHF rebound back up to the 10-day MA line at 1.1785 where it peaked with
badly overbought hourly studies in place. The Dow also pulled back from its best
levels of the day into the IMM close, limiting USD/CHF demand. Fed"s Kroszner
and Tsy Sect Paulson noted today that not all the wrinkles had been ironed out
of the financial markets, but the former said the Fed would act as needed to
ensure smooth functioning of markets. US policy makers hint that overpriced
assets related to subprime mortgages will be allowed to be revalued and losses
incurred, but this work-work will be done in as orderly a fashion as possible.
ECB"s Weber reaffirmed inflation concerns in the region but EUR/CHF continues to
follow the Dow"s price action.
[AUD/USD] opened in NY near 0.8785, as the 0.8750 low of the day was hit in the
first hour of trading in the aftermath of heavy sell stops being triggered below
last week"s 0.8820 or so lows on lingering equity market and risk aversion
worries. But the Dow managed to refrain from a follow-on meltdown today and
instead was posting modest gains into the IMM close, prompting profit-taking and
some bargain hunting buying of AUD/USD and AUD/JPY in the NY session. Energy and
metals prices were softer today, in part on comments from the Saudi Fin Min that
oil prices are not justified. Iraq"s President, a Kurd, claimed the PPK had
called a ceasefire, but the details of this were not encouraging for peace with
the Turks. Fed"s Kroszner said the Fed would act to ensure smooth financial
market functioning, but the Dow rebound looks like a relief rally more than
anything else and AUD/USD remains technically weakened by break of the main Up
TL from August"s lows.
[NZD/USD] opened in New York trading 0.7385 following the heavy selling seen in
Asia and Europe overnight on the back of the broad based carry liquidation
resulting from the ongoing escalation in risk aversion. Initial price action saw
the pair bounce off the lows to 0.7435 on profit taking from short-term spec
accounts, however, heavy selling on the US equity open could not be ignored with
the pair falling back under 0.7400 ahead of the London fix. Lack of any
significant US data releases on the day left the pair playing "follow-the-
leader, with a bounce seen back towards closing levels by 0.7450 as stocks set
to settle in positive territory.
[USD/CAD] opened New York around 0.9795, slipped to 0.9768 as New York tested
the downside then whipped around as the commodity complex started to slide. The
USD rally took the pair up to 0.924, but heavy offers from Corporate Canada
staggered every 10pts between 0.9800 to 0.9840 arrested the greenback’s ascent,
and by the end of the day the pair receded to close around 0.9800-05. The day’s
them was G7 hang over, with retiring BoC governor Dodge on the tapes overnight
stating that recent CAD strength seemed to be rather rapid, and of a “type 2”
(speculative) nature. Oil prices dropped, hitting $85.15 for Dec delivery at one
point, but closed down just 93 cents at $86.02. Gold futures dropped to $751.00,
and bounced back to close down $8 at $760. North American equity markets held,
and that was the central focus after Asia’s sell off.