Broker's Notes: Data on US manufacturing is of little help to dollar fortunes

Broker's Notes: Data on US manufacturing is of little help to dollar fortunes

US Dollar

Market witnessed that manufacturing activity in the Chicago region in US continued to grow at a slower pace with the PMI report falling from 62.3 to 56.7, the weakest since November 2009. This was followed by the FOMC Minutes. Both these events provided little help for the US dollar. Any optimism that may have come from a better than expected consumer confidence survey or the rise in house prices was offset by the Fed minutes which confirm that the central bank is still thinking about easier monetary policy. According to the minutes, not only did the Fed consider reinvesting principal payments from agency debt and agency mortgage backed securities in longer term Treasuries (which they announced on August 10th) but they also considered reinvesting in mortgages. The minutes also showed increasing division within the central bank as some members were worried that the recent decision would send the wrong signal to the market about the central bank’s willingness to resume asset purchases. From today, the focus will be on the Friday’s non-farm payrolls report and Challenger and ADP reports due for release later today.

Yen

The yen fell on Wednesday as the Australian dollar surged on faster-than-expected growth in Australia's economy and a moderate rebound in China's manufacturing sector. The yen extended losses slightly after Japanese ruling party powerbroker Ichiro Ozawa, challenging Prime Minister Naoto Kan in a party leadership vote, said in a policy statement he would implement steps including intervention if the yen rose sharply. The yen has shrugged off this week's monetary easing by the Bank of Japan. The Bank of Japan decided on Monday to expand its fixed-rate fund supply scheme to 30 trillion yen from 20 trillion yen, and to launch a new six-month loan operation.

Gold

Gold continued to trade firm as economic worries continues to persist driving investor to the safe haven asset. Holdings in SPDR Gold Trust rose by 3.952 tonnes to 1,302.508 tonnes on Aug. 31, from 1,298.556 tonnes on Aug. 27. Gold jumped 5.6 percent in August, the biggest monthly advance since April.

Indian Rupee

The Indian rupee retreated from a more than one-month low on Wednesday boosted by firm domestic shares, which raised hopes for a return in risk taking among global investors, with losses in the dollar overseas also aiding. Indian shares were trading 0.7 percent higher with financials leading the gains, taking cues from strong Asian markets. Shares provided cues on the direction of foreign fund flows which determine the rupee's fortunes to a large extent. So far this year, foreign funds have purchased shares worth $12.8 billion in addition to 2009's record $17.5 billion purchases.

Oil

Oil rose from a one-week low as Asian stocks gained and China’s manufacturing expanded at a faster-than-expected pace, reducing investors’ fears that the global economic recovery will falter. Futures on the Dubai Gold and Commodities Exchange (DGCX) gained as much as 0.7 percent after a government- backed report showed China’s Purchasing Managers’ Index jumped to 51.7 from 51.2 in August. The reading was more than the median 51.5 forecast by economists. An Energy Department report from US today will probably show US crude inventories increased 0.3 percent to 1.2 million barrels last week, a one-month high as demand slows.

Source: Richcomm Global, Dubai

www.richcommglobal.com