Wednesday, August 17, 2011

Market Morning Overview - August 17, 2011

Previous session overview
Weak share prices prompted investors to sell the euro against the dollar and the yen Wednesday in Asia, but only slightly, as they took a wait-and-see stance before any possible moves by the Swiss authorities to weaken the franc. 

While overall trade flows in Tokyo remained thin with many investors on summer leave, the small number of market participants took a cue from weak Japanese share prices to sell the common unit, traders said. 

As of 0450 GMT, the Nikkei 225 Stock Average was down 0.5%, and the euro was at USD1.4405 and was JPY110.45 from USD1.4407 and JPY110.68 in New York Tuesday. 

The dollar, meanwhile, was at JPY76.69 from JPY76.82 and The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was unchanged at 73.975 from 73.836.

The Swiss franc was range bound against the euro and the U.S. dollar amid speculation that Swiss authorities will announce steps to curb the Swiss franc's rampant strength as the Swiss government said it would decide Wednesday on a possible press conference on the Swiss franc.

The Australian dollar strengthened on Wednesday, boosted in part by an improving stock performance in Australia. At 0555 GMT, the Australian dollar was at USD1.0489, up from USD1.0474 late Tuesday. Against the Japanese yen, the Australian dollar was at JPY80.42, up from JPY80.495.
Market expectation
Traders are monitoring to see if the Swiss authorities indeed take steps to counter the rising franc. 

The Swiss government and Swiss National Bank are expected to make announcements at any time. 

Traders are cautious about the risk of Japan intervening in the currency market once the yen rises further, but they are slowly cutting down the dollar's trading range against the yen, dealers said.

Despite Australian dollar gains, however, traders and analysts noted that more increases might not be in the cards in the coming days as global risk tolerance remains low and resistance looms close for the currency. In addition dealers said a bounce back in the currency in recent days appears to be slowly running out of steam.

European stocks are expected to open lower Wednesday after a weaker U.S. session Tuesday while investors are unimpressed by the results of Tuesday's Franco-German governmental meeting, which included a proposal for a tax on financial transactions.