Wednesday, April 27, 2011 - 03:08
ASIA FX: Dollar Near Day's High Vs Yen, US FOMC Main Focus
SINGAPORE, April 27 (MNI) - The U.S. dollar maintained its gains on the yen in Asian session on Wednesday as the market responded to a Japan ratings outlook downgrade but was also near session lows against other major currencies, like the Australian dollar after higher-than-expected Australian consumer price data.
The U.S. currency started the day in a fairly narrow range against most major currencies, as the market waited for tonight's Federal Open Market Committee rate decision and Chairman Ben Bernanke's news conference.
"This meeting will be important in maintaining the weak tone for the U.S. dollar for the rest of the second quarter," said DBS Bank analysts.
"The next FOMC meeting will be held on June 22, a little more than a week before the Fed completes its second round of treasury purchases."
Dollar-yen initially lost some ground as early market participants took aim at U.S. dollar stop-loss sell orders, driving the pair down to a 81.27 low.
The same attempt was in pairs like Aussie-dollar, which broke above $1.0800 for the first time, and traded an early high of $1.0815 as Aussie bulls took aim at rumored stop-losses above.
The release of Australian Q1 CPI data from the Australian Bureau of Statistics kicked off another round of Aussie buying, this time lifting the pair up to $1.0852, a new post-float record high for the Australian currency.
"Given the speed with which major psychological levels have given way over the holiday weekend, few will be in any mood to speculate what the high might be in coming sessions," said Westpac Bank analysts.
"However, traders are likely to grow more nervous about being short U.S. dollar as the day progresses."
CPI rose 1.6% quarter-on-quarter in the January-March quarter, taking the annual consumer inflation rate to 3.3% over the year, the ABS data showed. The CPI data were just above the median market expectation of +1.2% quarter-on-quarter, with forecasts in a range of +1.0% to +1.5%.
The trimmed mean of consumer inflation, the Reserve Bank of Australia's preferred measure, was +0.9% on-quarter in Q1 compared with a 0.3% rise in the previous quarter. That took the annual CPI figure to +2.3% year-on-year in Q1 from +2.2% in the fourth quarter.
The latest inflation reading is unlikely to make the RBA uncomfortable even though at +1.6%, it is the highest reading in a decade, noted CommSec economist Savanth Sebastian.
In the medium-term, however, there is no question that inflationary pressures will remain the hot button issue for the RBA, and the key will be how quickly labor markets tighten up, Sebastian added.
The Australian dollar held on to the early gains through the afternoon, trading near the record high at $1.0821, compared with $1.0785 overnight in the U.S.
The yen was another major currency mover, after ratings firm Standard & Poor's said it has slashed the outlook for foreign currency- and yen-denominated sovereign debt of Japan to "negative" from "stable," citing the fallout from the March 11 earthquake disaster.
The ratings agency, meantime, affirmed its AA- rating for Japanese long-term debt and A-1+ rating for short-term debt.
Dollar-yen jumped to a high of Y81.90 after the statement while euro-yen also climbed to a Y120.16 high, as the yen stumbled.
Market News International's technical analysts noted, the pair was still trading with a heavy tone with dollar bears now eyeing a slide to Y81.03/10, the former being the 50.0% of Y76.53 to Y85.49 move and the latter, the daily Bollinger band base.
A break there favors move to the 2.00% volatility band base, which is currently valued at Y80.89.
Euro-dollar meanwhile was at $1.4664 as the Asian session neared its end, in the middle of its $1.4638 to $1.4714 range.
The immediate risk event remained the FOMC decision tonight.
The FOMC will release a statement at 1230 ET on April 27, which will be followed by a press conference with Federal Reserve Chairman Ben Bernanke at 1415 ET.
There will be no written questions, but instead the Fed Chair will call on reporters individually, is the understanding.
UBS FX strategists outlined various scenarios for the FOMC decision and possible dollar reaction.
The strategists put five percent odds that the Fed would be very dovish (fail to confirm end of QE2, negative assessment of the U.S. economy, hints of additional stimulus), where the dollar would see a knee-jerk decline and then continue to slip lower across the board.
"Compared to ECB President Jean-Claude Trichet, Bernanke is likely to appear less vigilant about second-round inflation effects," DBS Bank analysts said.
"Effectively, this will keep the Fed behind most of the world in hiking interest rates, one key factor pressing the U.S. dollar lower today. The other factor is the U.S. fiscal deficit/debt worries."
ASIA FX: Dollar Near Day's High Vs Yen, US FOMC Main Focus
SINGAPORE, April 27 (MNI) - The U.S. dollar maintained its gains on the yen in Asian session on Wednesday as the market responded to a Japan ratings outlook downgrade but was also near session lows against other major currencies, like the Australian dollar after higher-than-expected Australian consumer price data.
The U.S. currency started the day in a fairly narrow range against most major currencies, as the market waited for tonight's Federal Open Market Committee rate decision and Chairman Ben Bernanke's news conference.
"This meeting will be important in maintaining the weak tone for the U.S. dollar for the rest of the second quarter," said DBS Bank analysts.
"The next FOMC meeting will be held on June 22, a little more than a week before the Fed completes its second round of treasury purchases."
Dollar-yen initially lost some ground as early market participants took aim at U.S. dollar stop-loss sell orders, driving the pair down to a 81.27 low.
The same attempt was in pairs like Aussie-dollar, which broke above $1.0800 for the first time, and traded an early high of $1.0815 as Aussie bulls took aim at rumored stop-losses above.
The release of Australian Q1 CPI data from the Australian Bureau of Statistics kicked off another round of Aussie buying, this time lifting the pair up to $1.0852, a new post-float record high for the Australian currency.
"Given the speed with which major psychological levels have given way over the holiday weekend, few will be in any mood to speculate what the high might be in coming sessions," said Westpac Bank analysts.
"However, traders are likely to grow more nervous about being short U.S. dollar as the day progresses."
CPI rose 1.6% quarter-on-quarter in the January-March quarter, taking the annual consumer inflation rate to 3.3% over the year, the ABS data showed. The CPI data were just above the median market expectation of +1.2% quarter-on-quarter, with forecasts in a range of +1.0% to +1.5%.
The trimmed mean of consumer inflation, the Reserve Bank of Australia's preferred measure, was +0.9% on-quarter in Q1 compared with a 0.3% rise in the previous quarter. That took the annual CPI figure to +2.3% year-on-year in Q1 from +2.2% in the fourth quarter.
The latest inflation reading is unlikely to make the RBA uncomfortable even though at +1.6%, it is the highest reading in a decade, noted CommSec economist Savanth Sebastian.
In the medium-term, however, there is no question that inflationary pressures will remain the hot button issue for the RBA, and the key will be how quickly labor markets tighten up, Sebastian added.
The Australian dollar held on to the early gains through the afternoon, trading near the record high at $1.0821, compared with $1.0785 overnight in the U.S.
The yen was another major currency mover, after ratings firm Standard & Poor's said it has slashed the outlook for foreign currency- and yen-denominated sovereign debt of Japan to "negative" from "stable," citing the fallout from the March 11 earthquake disaster.
The ratings agency, meantime, affirmed its AA- rating for Japanese long-term debt and A-1+ rating for short-term debt.
Dollar-yen jumped to a high of Y81.90 after the statement while euro-yen also climbed to a Y120.16 high, as the yen stumbled.
Market News International's technical analysts noted, the pair was still trading with a heavy tone with dollar bears now eyeing a slide to Y81.03/10, the former being the 50.0% of Y76.53 to Y85.49 move and the latter, the daily Bollinger band base.
A break there favors move to the 2.00% volatility band base, which is currently valued at Y80.89.
Euro-dollar meanwhile was at $1.4664 as the Asian session neared its end, in the middle of its $1.4638 to $1.4714 range.
The immediate risk event remained the FOMC decision tonight.
The FOMC will release a statement at 1230 ET on April 27, which will be followed by a press conference with Federal Reserve Chairman Ben Bernanke at 1415 ET.
There will be no written questions, but instead the Fed Chair will call on reporters individually, is the understanding.
UBS FX strategists outlined various scenarios for the FOMC decision and possible dollar reaction.
The strategists put five percent odds that the Fed would be very dovish (fail to confirm end of QE2, negative assessment of the U.S. economy, hints of additional stimulus), where the dollar would see a knee-jerk decline and then continue to slip lower across the board.
"Compared to ECB President Jean-Claude Trichet, Bernanke is likely to appear less vigilant about second-round inflation effects," DBS Bank analysts said.
"Effectively, this will keep the Fed behind most of the world in hiking interest rates, one key factor pressing the U.S. dollar lower today. The other factor is the U.S. fiscal deficit/debt worries."
