Broker's notes: Sterling falls against the euro, gold trades firm

Sterling

Sterling fell to its lowest in nearly seven months against the euro on Monday, weighed down by the possibility the Bank of England may loosen monetary policy and that GDP data on Tuesday could point to a stuttering UK recovery.

The pound rose against a broadly weaker dollar as a Group of 20 agreement to shun competitive currency devaluations was viewed as a green light to resume dollar-selling on expectations the Federal Reserve will ease monetary policy next week.  

Investors were concerned weak UK third quarter gross domestic product data on Tuesday could increase the chances of more QE in the UK.

Economists expect Britain's economy grew just 0.4 percent between July and September, a third of the 1.2 percent recorded the previous quarter.
 
US dollar

The US dollar held just a yen above its 1995 record low against the Japanese currency on Tuesday, prompting Japanese policy-makers to remind the market that Tokyo might intervene if pushed to stop its currency from rising. 

The dollar's post-war record low of 79.75 yen set in April 1995 has become a focal point as the greenback has moved steadily lower, hitting a 15-year trough at 80.41 yen on Monday, with players wary that Japan may intervene if it nears 80.00 yen, following Tokyo's first intervention in six years in September.

The Bank of Japan, which acts on behalf of the Ministry of Finance, intervened on September 15 for the first time since 2004 to sell the yen when it rose beyond 83.00 per dollar. 

Indian rupee

The Indian rupee eased on Tuesday tailing losses in other Asian currencies and a choppy domestic share market that failed to provide direction.

Coal India's $3.5 billion IPO, the country's largest, was more than 15 times subscribed last week, giving the government power to price the issue at the top of its range and building momentum for other state offers.

The world's largest coal miner would begin to refund excess subscriptions for the IPO, which had an institutional order book of about $27 billion powered by foreign funds, by late October or early November and most traders expect the rupee to weaken towards 45 at that time.
 
Gold

Gold traded firm on Tuesday as investors turned focus on expectations of more monetary easing by the Federal Reserve, and physical buyers were on the sidelines awaiting a clear direction on prices.

Technical analysis showed that spot gold may have completed its first leg of rebound at $1,349.20 an ounce and would retrace to $1,328. Buying interest in the physical market was thin, but Indians have been buying thanks to a strong rupee.   

China remained a net importer of silver in September, with imports in the first nine months of the year up 24.7 per cent on the year and exports in the period down 60.2 per cent, official trade data showed.

Oil

Oil fell towards $82 on Tuesday, under pressure from an expected gain in US crude stockpiles for three out of four weeks and a volatile dollar.

Crude prices are more dependent on dollar fluctuations than at any time in the last 14 months as speculation intensifies that the US Federal Reserve will embark on a fresh round of monetary stimulus to boost recovery. 

Oil on Monday climbed as the dollar weakened to a 15-year low against the yen and sales of previously owned US homes rose a greater-than-expected 10 per cent in September, though they remained at depressed levels that point to a painful and protracted recovery for the housing market.

Source: Richcomm Global Services, DMCC; www.richcommglobal.com