The dollar traded 0.1 percent from a one-month low versus the euro as weaker U.S. economic indicators bolstered the argument for the Federal Reserve to delay a reduction to its bond-buying program. The euro was supported before data predicted to show services and factory output in the 17-nation region contracted at the slowest pace in more than a year. The Aussie dollar snapped a three-day gain ahead of a government report that economists forecast will show inflation remains contained.
The dollar was little changed at $1.3224 per euro as of 9:04 a.m. in Tokyo and yesterday touched $1.3239, the weakest level since June 21. It bought 99.49 yen from 99.43 yesterday, following a 1.2 percent, two-day drop. The Japanese currency slipped 0.1 percent to 131.58 per euro. Sales of new U.S. homes probably rose 1.7 percent.
The U.S. currency has risen 4.2 percent this year whereas the euro has advanced 4.5 percent, while the yen has been the worst performer, dropping more than 10 percent. Japan’s trade deficit shrank to the narrowest in a year in June. Imports outpaced exports by 180.8 billion yen ($1.8 billion), the Ministry of Finance said today.
A euro-area composite index based on a survey of purchasing managers in the services and manufacturing industries improved to 49.1 in July from 48.7 the previous month. On the other hand, Australia’s consumer price index probably gained 0.5 percent in the second quarter from a 0.4 percent pace in the previous three-month period, economists said before today’s data. Traders see a 71 percent chance the Reserve Bank of Australia will cut borrowing costs from a record low next month. The Aussie dollar was little changed at 92.96 U.S. cents.
The dollar fell against the yen for a second day as traders pushed back expectations for when the Federal Reserve will begin raising interest rates. The dollar fell 0.2 percent to 99.48 yen as of 10:02 a.m. in Tokyo after yesterday losing 1 percent, the biggest decline since July 10. It traded little changed at $1.3189 per euro after yesterday touching $1.3218, the weakest since June 21. The yen rose 0.2 percent to 131.21 per euro.
Investors see 41 percent odds U.S. policy makers will lift the federal funds rate, currently between zero and 0.25 percent, to 0.5 percent or higher by the end of 2014, compared with a 49 percent chance a week ago. Home prices in the U.S. rose 0.8 percent in May, following a 0.7 percent advance the previous month, while purchases slid 1.2 percent to a 5.08 million annualized rate, the National Association of Realtors reported yesterday.
The U.S. currency climbed last month after the Fed chief said the purchases may slow this year and stop in mid-2014 if economic growth meets policy makers’ projections. A euro-area composite index based on a survey of purchasing managers in both the services and manufacturing industries rose to 49.1 in July from 48.7 the previous month.
Asian stocks rose, with the regional benchmark index poised to halt a three-day loss, as Japanese Prime Minister Shinzo Abe’s victory in yesterday’s upper-house election gives him a freer hand to execute economic reforms. The Liberal Democratic Party gives it an outright parliamentary majority, allowing Abe to push through economic reforms and deregulation. The LDP and partner New Komeito gained at least 74 of the 121 seats up for grabs in the 242-seat upper house. The coalition now controls both legislative chambers for the first time since 2007 and need not face another election for three years.
SoftBank Corp. advanced 1.7 percent, leading gains among telecommunication services shares. While Nippon Paint Co. jumped 7.3 percent in Tokyo, and finally Newcrest Mining Ltd., jumped 5.7 percent in Sydney as the precious metal rose.
The MSCI Asia Pacific Index gained 0.7 percent to 135.86 as of 10:14 a.m. in Tokyo with more than four stocks advancing for each that fell on the measure. The MSCI Asia Pacific Index advanced 4.3 percent this year through July 19, whereas the Asian benchmark gauge traded at 13.2 times estimated earnings, compared with 15.4 times for the Standard & Poor’s 500 Index and 13.4 times for the Stoxx Europe 600 Index.
On the other hand Japan’s Topix index rose 0.5 percent as South Korea’s Kospi index gained 1.1 percent. Australia’s S&P/ASX 200 Index added 1 percent, while New Zealand’s NZX 50 Index climbed 0.3 percent. Futures on the S&P 500 rose 0.2 percent today. The measure added 0.2 percent in New York on July 19. About 53 percent of S&P 500 companies that have reported second-quarter results have beaten revenue projections.
August 11, 2010 US stocks fell yesterday on speculation that the global economic growth is slowing down. In China, the imports data were increasing slower than the economists’ forecasts, bolstering investors’ concern over the US equities market’s stability. Corporate earnings have also declined after the Federal Reserve announced the economic growth is slow enough to require stimulus. Among the companies who declared a decline in corporate earnings were the Bank of America Corp., Intel Corporation and Alcoa Incorporated, pulling the Standard & Poor’s 500 index to as much as 1119.7. The Dow Jones Industrial Average and Nasdaq 100 declined to 10618 and 1896.5, respectively, after the productivity per worker declined in the second quarter from 2.8% to -0.9% raising concerns that economy may have a trouble recovering.
In treasuries, the 30-year bond increased 0.34 to 129.78125 as the Federal Reserve cut interest rates to stimulate the economy. Investors had preferred to invest their money to safer investments such as the treasuries to hedge their wealth against the uncertainties in the economy.
In currencies, the US dollar index strengthened by 0.16 to 80.92 .dxy against a basket of six major currencies, despite the weak economic outlook of investors. The greenback went up as investors await the results of Federal Reserve’s plan of stimulating the economy.
In energies, the crude oil for September delivery fell on speculations that demand may decline. A weaker economy may have compelled consumers to cut down on their fuel consumption amid speculation that recovery is slower than economists’ forecasts. Oil dropped as much as 1.51 percent yesterday and settled at $80.25.
In the metals market, gold for December delivery was down to $1198 losing its appeal as a safe investment against a weakening dollar. The gold declined after the Federal Reserve announced it would buy back more bonds to stimulate economic growth. Silver for September delivery, on the other hand, also declined to $18.158 by 0.46 percent. Copper for September delivery went down to $3.3125 by 1.24 percent on speculations of a weaker demand over concerns of a slowing economic growth.
In the grains market, the December corn and November soybeans slipped to $4.09 and $10.2125 in Chicago Board of Trade amid speculation that rain in US, the largest producer, will improve crops. The poor economic data of China, the largest consumer, also pulled the soybean prices down. Wheat for September delivery dropped 2.50 for the third session to $6.9475 amid speculation that importers may limit orders after the sudden rise of prices last month. The world still has enough supply to compensate the damaged crops in Russia, the largest producer and exporter. In addition, according to economists, commodities are losing its appeal as investments as the US currency strengthens.
In the softs market, sugar for October delivery went up to $0.1856 over concerns on Russia’s prolonged unfavorable weather tightening supplies. Cocoa for September delivery goes down to $2906 by 3.51 percent on speculation that supplies will be robust. Coffee, however, for September delivery rose slightly by 0.03 to $1.6965.
August 11, 2010