Broker's Notes: Euro falls broadly; yen hit the day's high

Euro

Euro fell broadly on Tuesday after rekindled concerns about the European banking sector and prospects of slowing growth in the euro zone prompted investors to sell higher-risk currencies. A fall in German manufacturing orders in July added to the currency’s woes. The yen and the Swiss franc, seen as safe havens, rallied after a Wall Street Journal report highlighting the shortcomings of European bank stress tests in July spurred risk aversion. The WSJ report came after Germany's banking association said on Monday the country's 10 biggest banks may need 105 billion euros of additional capital under revamped rules

Yen

The yen hit the day's high after Bank of Japan Governor Masaaki Shirakawa said monetary authorities could not control forex rates, increasing speculation Japan was not preparing to act to stem yen strength at the moment. The Governor has essentially ruled out intervention in the near term.

Oil

Oil extended its slide for a second day in on speculation that fuel demand will decline as the US summer peak consumption season ends. Yesterday’s Labor Day holiday in US marks the end of the peak driving season. Refiners often idle units for maintenance in September and October as gasoline demand drops and before heating-oil use increases. Last week, the US Energy Department reported that US crude inventories last week rose to the highest point since June. Motor fuel supplies are about 10 percent higher than last year. The remnants of Tropical Storm Gaston looked very likely to strengthen again as a tropical cyclone in the Atlantic and could threaten the Caribbean's Leeward Islands in coming days as the system moves on a westward track, US forecasters said on Sunday. It was still too early to determine whether the system would eventually reach the oil-rich Gulf of Mexico.

Gold

Gold traded firm on Tuesday as economic uncertainty re-emerged in the euro zone and also because of steady demand from the jewellery segment ahead of the festive seasons in India and Middle East. Gold could advance to a record on concern among investors that some European banks may struggle to raise additional funds. Bullion is set for a 10th annual gain as investors seek to protect their wealth against financial turmoil in Europe and the prospect of slowing economic growth. The all-time high in June came amid investor concern that sovereign-debt levels in some European states were too high, and there was increased risk of default if governments were unable to issue new debt.

Australian stocks dipped on Tuesday, dragged lower by mining shares after Prime Minister Julia Gillard's Labor party secured a majority to form the next government, ending two weeks of uncertainty. In the meanwhile the Reserve Bank of Australia as widely expected kept the interest rates unchanged at 4.5 percent at its board meeting on Tuesday. Investors will be looking for the central bank's view on the economy after recent strong domestic data. With no economic data on the global calendar, trading in the pair is likely to be driven by risk aversion flows for the rest of the day and if the equity markets continue the sell off,  then AUD could be quickly fall below the 0.9100 figure as markets react the uncertainty of economic growth.

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

Price Update

GOLD

1247.05

SILVER

19.64

EURO

1.2745

GBP

1.5327

YEN

83.85

RUPEE

46.808

AED / INR

12.734

AUD

0.9116

CHF

1.0123

CAD

1.0417

OIL - WTI-sep'10)

73.07

Date

September 7, 2010

Time

4:05:51 PM