Business | Markets
Dollar ends week on strong note as market news disappoints
Increase in risk aversion pushes demand for low-yielding currencies.
- Special to Gulf News
- Published: 23:04 July 4, 2009
Dubai: The US dollar ended the week as the strongest of the majors largely due to increased risk aversion following the release of disappointing market news.
The data triggered sharp declines on the US stock markets and forex carry trades, and also increased demand for low yielding currencies such as the greenback and the Japanese yen.
Euro
The euro had a volatile week with a host of economic reports being released; however it ended the week almost unchanged from its usual range against the dollar. Forex options markets showed that volatility expectations remained high ahead of the European Central Bank interest rate decision and the US non-farm payrolls report, but sharp moves after the report were incapable of pushing the euro below the 1.40 mark.
The European Central Bank had come under pressure to further cut rates with the Organisation for Economic Cooperation and Development (OECD) urging the bank to cut rates towards zero, and to hold them at those levels going into 2010; however rates were left unchanged for the time being. Euro zone confidence improved for the third month in June, but the European Commission warned that problems still persist.
Range for previous week: $1.3866 - $1.4178 (Dh5.0930 - Dh5.2076)
Range for this week: $1.3927 - $1.4201 (Dh5.1154 Dh5.2160)
Sterling
Sterling fell significantly during the week from a high of $1.6746 as an increase in risk aversion and news that first quarter GDP contraction was larger than expected at 2.4 per cent, its lowest level since the late 1970s. Year on year GDP growth was revised down to -4.9 per cent, the lowest rate since record keeping began in 1956. Dismal reports from the US also added to the bearish sentiment and sparked broad-based risk aversion. Sterling shot higher to start the week after Nationwide showed house prices gained 0.9 per cent in June, spurring hope that housing sector stabilisation would lead the way to a recovery.
Range for previous week: $1.6306 - $1.6620 (Dh5.9892 Dh6.1045)
Range for this week: $1.6299 - $1.6744
Yen
The Japanese yen may continue to strengthen against its major counterparts over the following week as market players curb their appetite for higher risk, and the low yielding currency should benefit from safe-haven flows as investors weigh the outlook for a global recovery. Data released in the past week show that the Tankan index of Japanese business sentiment rose from a reading of -58 in March to -48 in June. The index is widely followed because it is fairly correlated with Japanese GDP.
Data also suggests that the economy has bounced, with industrial production rising for the third consecutive month in May. While it is still down 30 per cent relative to last year, production rose more than 14 per cent from its all time low last February.
Range for previous week: ¥ 94.40 ¥ 96.70 (Dh0.037983 Dh 0.038908)
Range for this week: ¥ 95.13 ¥ 96.99 (Dh0.038610 Dh0.037869)
- HSBC Global Markets Middle East
Share this article
Popular in Business
-
Global Village
A world of fun
Revamped layout featuring four cultures to greet visitors this season
Business Editor's choice
-
Lamborghini sales exceed expectations in UAE
Things more or less normal, luxury carmaker says
-
Middle East firms eye global reach
Regional competition pushes telecom companies to seek revenue elsewhere
-
Living Legends 'alive and kicking'
Construction for the project progresses after a late start.
