by Darrell Jobman, Editor-in-Chief TraderPlanet.com
EUR/US$
The dollar found support around 1.5840 against the Euro on Thursday and strengthened to highs around 1.5725. The US currency was unable to sustain the gains and weakened back to consolidate around the 1.5780 level in cautious trading.
The final fourth-quarter US GDP estimate was confirmed at 0.6% which will provide some minor relief given the possibility of a downgrade to below zero. Initial jobless claims also fell slightly to 366,000 from 375,000 the previous week which continues to suggests a softer labour market, but no major further deterioration at this stage.
The dollar will look to take some comfort from tentative evidence that the housing sector is close to reaching a trough, but markets will want more convincing evidence before there is any major change in dollar sentiment.
ECB officials have continued to take a tough stance on monetary policy which supported the Euro. There were also reports that European officials were increasingly irritated by the US administration’s attitude towards the US dollar.
In the run up to April’s G7 meetings there will be pressure on the US to take a much stronger attitude to defending the currency. There is also likely to be increased speculation over action to stabilise currencies.
Yen
The dollar found some support below the 99 level in Asian trading on Thursday and pushed back to 99.60.
Bank of Japan member Suda warned over downside risks to the economy, maintaining the generally downbeat tone. The Finance Ministry also state that they were monitoring the forex market closely, although there was no suggestion of intervention at this stage. Nevertheless, markets will remain on alert for G7 efforts to stabilise the dollar.
Overall levels of risk aversion were slightly lower during the day which limited yen support, although there was still a high degree of caution due to rumours of further difficulties within the financial sector. This was offset by lower than expected demand in the first TAPS Fed auction which suggested liquidity constraints may be less serious than feared.
Underlying caution will tend to curb capital flows from Japan. There will be some speculation over a fresh flow of funds overseas at the start of the new fiscal year next week which will tend to weaken the yen slightly.
Sterling
Sterling pushed to highs near 2.02 against the dollar on Thursday, but was unable to sustain the advance and weakened back to around 2.0050 in US trading. Sterling also hit resistance close to 0.7820 against the Euro before a retreat to 0.7870 in New York.
The latest BBA data recorded a small monthly increase in mortgage approvals, although the figure was still sharply down from the level recorded last February. The CBI retail survey indicated that sales were stronger than expected in March. The expectations component was weaker and sales of durable goods was weak which continues to suggest an underlying weakening in spending.
Overall sentiment towards the UK currency remains generally weak with expectations of a series of interest rate cuts over the next few months, especially with evidence of further serious stresses in the mortgage sector.
Swiss Franc
The dollar found support below the 0.99 level against the franc on Thursday, but was unable to push back above parity. The franc fluctuated around the 1.57 level against the Euro.
National Bank member Jordan stated that the level of interest rates was appropriate and that there was no evidence of a credit crunch within the Swiss economy. Jordan also stated that the franc was not excessively strong against the Euro in historic terms and the comments will provide some franc support. The currency will also gain some support if there is a robust reading for the KOF leading index on Friday.
The franc continued to be influenced by degrees of risk aversion and the Swiss currency edged marginally weaker after the first Federal Reserve TAF auction to boost market liquidity.
Source: VantagePoint Software, Market Technologies, LLC
Australian dollar
The Australian dollar has continued to take advantage of US currency vulnerability on Wednesday and tested levels above the 0.92 level during Thursday, especially as commodity prices were also firmer.
The domestic influences remained limited with Reserve Bank Governor Stevens not making any significant comments on the economy or monetary policy in an overnight speech. The Australian dollar was still hampered by levels of risk aversion with Chinese stock market falling sharply on Thursday. The Australian dollar consolidated just below the 0.92 level in New York.
