Broker's Notes: Yen creeps up placing the market on alert; Gold trades steady

Yen

The yen crept higher on Thursday but the market was on the alert for more intervention by Japanese authorities after a massive amount of yen-selling the previous day knocked the yen off a 15-year high against the dollar. Most market pose chances of another round of intervention increasing if the dollar slips back below 85 yen, after Japan sold an estimated 2 trillion yen ($23 billion) on Wednesday, a record for a single day, in a move seen as aimed at showing its resolve to curb yen strength. Prime Minister Naoto Kan reiterated on Thursday that Japan would take decisive steps on yen rises if needed.

Sterling

Sterling rose against the dollar and recovered from a seven-week low versus the euro on Wednesday as selling on a rise in UK jobless claims fizzled out as the market focused on an increase in employment. The first rise in the claimant count since January confounded forecasts for a fall of 3,000, and showed weakness in the employment sector would continue to drag on the UK's fragile recovery. A speech by Bank of England Governor Mervyn King gave no hints that more quantitative easing was coming soon to help the fragile economy, and offered a chance for investors who have been short on the pound to trim those positions. Today is an important news day for the UK with a number of key releases including Retail Sales, which is expected to rise by 0.3 percent compared to the previous 0.1 percent.

India’s Central Bank

India's central bank raised interest rates more aggressively than expected on Thursday, keeping up its fight against inflation that is slowly easing but still well above its comfort level. Repo rate, the short-term lending rate, was hiked by 25 basis points at 6.0 percent. Reverse repo rate, the short-term borrowing rate was hiked by 50 basis points to 5.0 percent. Cash reserve ratio, the level of deposits that commercial banks must keep with the central bank was kept unchanged 6.0 percent. Official data this week showed wholesale price index rose an annual 8.5 percent in August on new base year. Under the old base year it was 9.5 percent, compared with market estimate of 9.6 percent. The government also revised July inflation to 9.8 percent from the earlier number of 9.97 percent. Data showed industrial output accelerating much faster than expected in July at 13.8 percent from a year ago on surging capital goods production. The central bank had raised key rates four times between mid-March and July.

Gold

Gold was steady on Thursday as weak US economic data reiterated the uncertainty surrounding the global economic recovery, while silver hit a new high as investors sought this alternative safe-haven asset. US industrial output slowed last month and a regional measure of factory activity touched a 14-month low in September, pointing to a cooling in manufacturing as the boost from an inventory build-up fades. Silver hit a new 2-1/2-year high of $20.65 an ounce, before easing to $20.53. It has gained nearly 22 percent so far this year, outshining gold's 16 percent climb. The gold/silver ratio, the ounces of silver needed to buy an ounce of gold, stood at 61.71, down from the two-month peak just above 68 hit in late-August.

Oil

Oil fell for a third session on Thursday, shedding more than $1 after Enbridge said U.S. regulators had agreed to a Friday restart of its biggest pipeline from Canada, restoring crude flows to refiners in the Midwest. Crude oil futures fell $1.02 cents to $75 a barrel, having dropped by 1 percent on Wednesday. The contract hit a one-month high above $78 earlier this week on concerns the Enbridge outage could continue until October.

Source: Richcomm Global, Dubai; www.richcommglobal.com