Broker's Notes: US dollar hit 15-year low against yen

Dollar

The dollar hit a 15-year low against the yen on Tuesday as Japanese Prime Minister Naoto Kan won the ruling party leadership vote, raising speculation Tokyo would not act immediately to stem the yen's rise. Kan will keep his job after an unexpectedly decisive victory over party heavyweight Ichiro Ozawa, who had made more strident calls to curb the yen's advance. Any dollar rise may be short-lived, with Monday's 84.43 intraday peak seen as the first point of resistance, due to expectations Japanese exporters would sell more dollars before their half-year book closing on Sept. 30.

Eurozone GDP

Euro zone monthly industrial production was weaker than expected in July, pulled down by a slump in durable consumer goods, but output was much higher than a year earlier.   The European Union's statistics office, Eurostat, said industrial production in the 16 countries using the euro was flat month-on-month for a 7.1 percent year-on-year rise. Economists had expected a 0.2 percent monthly increase and an 8.0 percent annual gain. Industrial production accounted for less than 17 percent of euro zone GDP in the second quarter but because of its knock-on effects on other sectors it is still a good proxy for estimating gross domestic product growth.

Sterling

Sterling slipped on Tuesday after a weak reading of UK house prices highlighted the fragility of the housing market and overshadowed figures showing an improvement in consumer confidence. Stronger-than-expected UK inflation data initially helped the pound to pare losses as it raised speculation that stubborn price risks would keep the Bank of England from extending quantitative easing in the near future. But sterling's rally on the CPI figures was short-lived as investors acknowledge the economic recovery remains a struggle. GBP’s inability to push into the mid- $1.54 region indicated weak sentiment, although support was seen around $1.5385, where the 200-day moving average lay on Tuesday.

Gold

Gold ticked up on Tuesday as the US dollar slipped against other currencies and physical demand picked up, while silver was steady near its strongest since early 2008 on hopes of a recovery in the global economy. Investment demand however witnessed a slide.    The SPDR Gold Trust, the world’s largest gold ETF, said its holdings dropped to 1,292.619 tonnes by Sept 13 from 1,293.531 tonnes by Sept 10. The holdings hit a record 1,320.436 tonnes on June 29.

Technically gold is held in a tight range it’s not clear which direction will the break to. The immediate resistance is sighted at $1,256, the 76.4 percent Fibonacci retracement level on the fall from 1,262.25 to 1,236.55, based on a Fibonacci projection. However gains beyond that could be limited to 1262; any downside from here may find a good support first at 1242, followed by 1236. A close below to 1,232 will confirm the resumption of the bear trend; this will extend losses immediately to 1,224.

Indian Rupee

The Indian rupee strengthened on Tuesday as shares rallied more than 1 percent, boosting hopes for more portfolio inflows. The dollar's losses versus major currencies also helped sentiment. Shares settled up 0.8, after having climbed more than 1.4 percent earlier, as bullishness over the Indian growth story continued to lure investors. India's wholesale price index inflation was below expectations for August, rising an annual 8.5 percent, government data showed on Tuesday. The data was the first in a new series with a different base year of 2004/05, new components and weightings. The below-forecast inflation may ease pressure on the central bank to tighten monetary policy at its mid-quarter review on Thursday. Before Tuesday's inflation data, the Reserve Bank of India had been widely expected by economists to lift key interest rates by 25 basis points each on Thursday

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