Wednesday, August 24, 2011

Market Morning Overview - August 24, 2011

Previous session overview
The dollar gave up gains versus the yen made earlier Wednesday in Asia as expectations waned for measures announced by Japan to stem the yen's strength. 

The dollar moved higher early in Asia following news that Japanese Finance Minister Yoshihiko Noda would hold a press conference on steps to cope with the strong yen. 

The actual measures announced later, however, didn't impress. 

Earlier in the day, the dollar made some gains versus the yen after Moody's Investors Service downgraded Japan's sovereign debt rating. Moody's said it was cutting Japan's government bond rating to Aa3 from Aa2, citing "large budget deficits and the build-up in Japanese government debt since the 2009 global recession."

Despite these developments, the major currency pairs remained in recent trading ranges as market participants avoided aggressive bets ahead of the Jackson Hole, Wyo. central-bankers' summit starting Friday, where Fed Chairman Bernanke is scheduled to speak. 

The dollar was at JPY76.71 as of 0450 GMT, after rising to a session high of JPY76.88, from JPY76.65 late Tuesday in New York. The euro was at JPY110.54 from JPY110.71. The euro was at USD1.4409 from USD1.4441. The dollar was at CHF0.7938 from CHF0.7925. The U.K. pound was at USD1.6496 from USD1.6484. 

The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was lower at 73.956 from 74.074. 

The Australian dollar edged up Wednesday on the back of improving risk sentiment, though the gains evaporated somewhat in late Asian trade. At 0600 GMT, the Australian dollar was at USD1.0480, up from USD1.0460 late Tuesday. Against the Japanese yen, the Australian dollar was at JPY80.34, up slightly from JPY80.315.
Market expectation
The euro, sterling and even the muscular Swiss franc are slightly lower against the U.S. dollar Wednesday ahead of what could be more key data, including German Ifo and euro-zone industrial orders. 

While stock market investors ramp up hopes for a third round of quantitative easing, or QE3, from the U.S. Federal Reserve, their foreign exchange counterparts seem less convinced. 

Among economic indicators due later in the global day, German Ifo business climate index for August and U.S. durable goods orders for July are likely be watched closely. Dealers said a weak figure is likely to weaken the euro against the dollar while a strong figure would have the opposite effect.

European stocks are expected to start up Wednesday, following the strong close on Wall Street on hopes the Federal Reserve may announce this week additional measures to help boost the U.S. economy, while a widely-expected credit rating downgrade for Japan will likely have little impact on the European open.