Forex - US dollar higher in Sydney morning as equity markets ease volatility

Forex - US dollar higher in Sydney morning as equity markets ease volatility

	Published : Thu, 01 Mar 2007 00:59 By : Agencies Print this Story

SYDNEY (XFN-ASIA) - The US dollar was stronger against the yen and euro here as currency markets stabilized from Tuesday's large swings following the overnight correction in global equity markets, dealers said.

At 10.05 am Sydney (2305 GMT Wednesday), the dollar was at 118.61 yen compared to 118.36 in late New York trading while the euro was at 1.3224 usd, down from 1.3232 in New York.

Dealers said currency markets took some lead from the Shanghai Composite index rebounding 3.9 pct yesterday after Tuesday's 8.8 pct plunge, which was triggered by fears that China's regulatory authorities would crack down on illegal share trading and install a capital gains tax but later denied by the authorities.

The Dow Jones industrial index regained 0.43 pct overnight while European sharemarkets continued to retreat, including the UK and German indexes.

Dealers said overnight comments from US Federal Reserve chairman Ben Bernanke helped ease the concerns of currency traders and equity investors alike. Bernanke said there was no single trigger for the global equity correction, stock markets seemed to be working well and that he had not changed his forecast for moderate US growth this year.

The US dollar regained further ground against the yen overnight as traders viewed Tuesday's sell-off in the currency pair as overdone, while the euro rose against the greenback from firmer employment data in Germany and weaker indicators in the US.

German unemployment fell 79,000 in February to its lowest level in over five years and was the seventh successive monthly fall. The market consensus was looking at a 40,000 decrease.

In the US overnight, the second estimate of gross domestic product for the December quarter was revised down to 2.2 pct year-on-year from an initial reading of 3.5 pct.

Commonwealth Bank economist Joseph Capurso said after the GDP data was released, some US dollar holders were relieved that the figure was not worse than had been expected, especially after the surprise 7.8 pct drop in durable goods orders for January announced Tuesday.

However, dealers said other US indicators released overnight will provide headwinds for the greenback ahead.

US new home sales for January plunged 16.6 pct, the biggest fall in 13 years and well below market expectations of a 3.6 pct decline. The data followed the unseasonably warmer December when new home sales rose 9.1 pct.

The latest Chicago purchasing managers survey (PMI) eased to 47.9 index points in February from 48.8 in January, also below the market consensus of an increase to 50.0 index points.

Dealers said tonight's focus will be the core PCE deflator for January - the Federal Reserve's preferred measure of inflation - and the national ISM manufacturing data for February.

Sydney 10.05 am (2305 GMT Wednesday)

US dollar

118.61 yen

1.2195 sfr

Euro

1.3224 usd

156.88 yen

1.6125 sfr

0.6738 stg

Sterling

1.9625 usd

232.80 yen

2.3926 sfr

Australian dollar

0.7876 usd

0.4013 stg

93.445 yen

New Zealand dollar

0.7007 usd

paul.daniel@xfn.com