Sign inDarrell's Commentaries
Daily Currency Analysis
EUR/US$
The dollar retained a firm tone in European trading on Thursday and tested levels just below 1.39 in early US trading.
US jobless claims rose to 627,000 in the latest week from a revised 612,000 previously while continuing claims rose to near 6.74mn. The claims data has been showing signs of improvement and the latest release will cause some fresh anxiety over the labour-market situation, although there will inevitably be weekly volatility.
US GDP for the first quarter was revised slightly to show a figure of -5.5% from the 5.7% estimate previously. The immediate impact of the data was to strengthen the dollar slightly on a deterioration in risk appetite, but confidence rebounded later in US trading as Wall Street rallied which helped underpin the Euro.
There was also a rally in commodity prices during the day which sapped dollar demand and helped push the Euro back to the 1.40 region later in the US session. Indecisive trading may remain a key feature in the short term.
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Yen
The latest capital account data was again important with net outflows from Japan of US$3.5bn in the latest reporting week as domestic investors looked to increase their exposure to higher-yield assets. It was the seventh successive week of outflows and the yen weakened to around 96.20 against the dollar and also declined against all major currencies.
There will be further expectations of capital outflows, especially if there is any improvement in risk appetite.
The US currency was unable to make any further headway during the day and edged lower to 95.75 in New York. The yen was also generally resilient on the crosses even though equity markets attempted to rally with solid gains on Wall Street. The overall price action suggests that there are still important reservations over aggressive yen selling.
Sterling
Sterling was unable to rally above the 1.65 level in early Europe on Thursday and then weakened steadily during the day with lows around 1.6230. The UK currency was able to avoid a test of key technical support in the 1.62 region and rallied back to near 1.64 later in US trading as choppy trading patters persisted. Sterling also found support weaker than 0.8570 against the Euro.
There were no economic data releases or official comments to guide Sterling direction during the day. The currency was still unsettled to some extent by debt fears during European trading following the comments from Bank of England governor King on Wednesday, but the impact faded during US trading as equity markets rallied.
There will be a much greater chance of a change in sentiment if there is a sustained deterioration in risk appetite.
Swiss franc
The dollar found support around 1.0920 against the franc during the day and continued to test resistance levels above 1.10.
For the second successive day, the National Bank intervened in the markets to weaken the Swiss currency. The evidence suggest it may have been less aggressive than during Wednesday and the dollar was unable to sustain a break above 1.10 against the Swiss franc. The Euro had a firmer tone against the franc with a peak above 1.5350, although it was unable to sustain its best levels and weakened back to the 1.53 region later in New York.
The National Bank is likely to maintain its policy of intervention and this will severely limit the scope for franc rallies even if there is a sustained deterioration in international risk appetite. The 1.10 technical region will remain very important for the dollar in the short term.
Source: VantagePoint Intermarket Analysis Software
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Australian dollar
The firmer US currency tone was a negative factor for the Australian currency and it dipped to the 0.7920 region before a rebound to 0.7990 in early Europe. Hopes for an improvement in the US and global economy will continue to provide some degree of support for the Australian dollar, especially with the potential for further capital inflows from Japan.
The Australian dollar edged lower again in early New York before rallying back to just above the 0.80 region as choppy trading conditions persisted.
Tags:forex, currency
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