Wednesday, August 3, 2011

Market Morning Overview - August 3, 2011

Previous session overview
The dollar rose against the yen on Wednesday in Asia as investors took a cue from weakness in the Japanese currency against the euro on the back of firm Chinese share prices. 

The Shanghai Composite Index was up 0.1% as of 0450 GMT, and that prompted investors to cut holdings of the safe-haven yen and increase the euro instead. 

Part of the reason why the yen didn't rise during Asia hours was investors were awaiting for comments from Japanese officials including Finance Minister Yoshihiko Noda and Prime Minister Naoto Kan as well as Bank of Japan Gov. Masaaki Shirakawa who were meeting around the noon to discuss economic conditions including the yen. 

After-meeting comments were far from satisfying and unlikely to persuade investors to sell the yen for fear of an imminent currency intervention, dealers said. 

As of 0450GMT, the dollar was at JPY77.24 from JPY77.14 in New York Tuesday while the euro was at JPY109.76 from JPY109.52 and USD1.4213 from USD1.4200. The dollar index was at 74.459 from 74.472.

The passage of the contentious U.S. debt ceiling deal by the Senate did little to alleviate persistent investor concerns. The Swiss franc Tuesday surged to a record high against the euro and dollar as investors fretted about sovereign debt risks and a lethargic global economy.

Sweeping risk aversion sent the Australian dollar sharply lower in Asian trade Wednesday as investors fret over the global economy and after weak domestic retail sales numbers fuelled bets for a rate cut in coming months. At 0602 GMT, the Australian dollar was at USD1.0747, down from USD1.0925 late Tuesday and off a 30-year high of USD1.1080 last week. Against the Japanese yen, the Australian dollar was at JPY82.885, down from JPY84.57. Front-end bond futures rallied hard as dealers up their bets on monetary policy easing, pricing in over 80 basis points of cuts by the Reserve Bank of Australia by year end.
Market expectation
Looking ahead, investors will pay attention to the U.S. jobs report by Automatic Data Processing Inc. Economists predict the report will show the number of payrolls has increased by 105,000 in July. 

If the data beat the consensus, the greenback may raise, but not much, said dealers. 

Dealers said it's hard for the dollar to rise above JPY78.00 in any case for now because investors will be waiting for Friday's non-farm payrolls data. 

European stocks are expected to open sharply lower Wednesday, despite the passage of the U.S. debt plan by the Senate, as downbeat U.S. data sparks fresh concerns about a U.S. recovery, while euro-zone debt worries continue to undermine sentiment.