Thursday, July 28, 2011

Standard & Poor's downgraded Greece's credit rating to 'CC' from 'CCC

Previous session overview
The yen retained its strength against the euro and the dollar Thursday in Asia as traders park their funds in safe havens as sovereign debt concerns both in the U.S. and the euro zone linger. 

Still, fear of a currency intervention by the Japanese Finance Ministry has made traders wary of pushing the yen higher, even though they believe such action is a little way off. 

At 0450 GMT, the euro was at USD1.4359 from at USD1.4363 in late New York Wednesday. The dollar was at JPY77.84 from JPY77.98, while the euro was at JPY111.78 from JPY112.02. The U.K. pound was at USD1.6331 from USD1.6326. The dollar was CHF0.8022 from CHF0.8015.

Japan's Finance Minister said Thursday that he will continue to watch movements in the foreign exchange market, adding that he is aware of concerns among exporters about the strength of the yen. Some analysts said a single-handed currency intervention by Japan should be made in tandem with further credit easing by the Bank of Japan to maximize the effect of intervention.
The dollar hit all-time low of JPY76.25 on March 17 after the earthquake and tsunami. The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at 74.094 from 74.087. 

The Pound fell back to the lower USD1.6300 region with market wide USD strength and heavy GBPJPY selling pushing Cable lower. EURGBP fell below GBP0.8800 but is still inside the recent range. July CBI Industrial trends showed a sharp slowdown to -10 vs. -2 previously.

The Australian dollar edged slightly off a 30-year high Thursday as traders in Asia increased bets that Australia's central bank would hike rates in the coming months but worried about the debt issues still facing other regions. At 0620 GMT, the Australian dollar was at USD1.1037, down slightly from USD1.1051 late Wednesday and a 30-year high of USD1.1081 hit during mid-day trading in London. The push to a new high had been on hold for the past three months but resumed in the past two weeks as the U.S. debt ceiling debate deteriorated.
Market expectation
Many traders still predict a last-minute breakthrough, but markets remain nervous and dealers said they would advise selling the dollar against the yen and Swiss franc.

Traders and analysts say month-end USD selling by Japanese exporters could come on Friday but dealers say such sales may not be as heavy as usual as some Japanese firms are closed on Thursday and Friday as part of their efforts to conserve energy.

European stocks are expected to start sharply lower as U.S. debt negotiations have failed to make any meaningful progress and after the Dow Jones Industrial Average shed almost 200 points on Wall Street. 

In addition, euro-zone sovereign debt fears are back in focus, after Standard & Poor's downgraded Greece's long-term sovereign credit rating to 'CC' from 'CCC,' and euro-zone confidence surveys Thursday are not expected to be good.