Forex - Dollar recovers from earlier falls; Carry trade dents yen further |
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Thu, 31 May 2007 17:40
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LONDON (Thomson Financial) - The dollar recovered from earlier modest falls against major currencies as strong Chicago PMI data offset earlier weaker-than-expected US GDP data, while ongoing popularity for carry trades caused the yen to weaken further.Revised GDP figures released this afternoon showed the US economy grew by just 0.6 pct in the first quarter from the previous three months, down sharply from the 1.3 pct gain estimated a month ago. Analysts had forecast a more moderate revision to 0.8 pct.The euro rose to a day high of 1.3577 usd following the news, but dipped back down again after the latest Chicago PMI data showed a bigger-than-expected rise in May to 61.7 from 52.9 in April.Standard Chartered currency analyst Marios Maratheftis noted, however, that the dollar's movements following the data have been very small as the market remains confined to tight and well-worn ranges.'We are in a rangebound market because the market is prepared for no change in interest rates from the Federal Reserve and more rate hikes from the European Central Bank and the Bank of England'.'This trend is likely to continue as there seems to be nothing to suggest that the market should readjust its expectations,' he said.Tomorrow, attention will turn to the release of key US monthly non-farm payrolls data, though unless the numbers are widely different from market expectations the release is expected to have little impact on currencies.Elsewhere, the yen weakened further, hitting its lowest level against the dollar in three and a half months, while the Australian dollar surged as popularity for carry trades continued, with investors unconcerned about the prospect of any sharp unwinding of such trades any time soon.The carry trade is where investors borrow in currencies with low interest rates such as the yen in order to invest in higher yielding currencies elsewhere, with the Australian and New Zealand dollars particularly popular.Standard Chartered's Maratheftis said the carry trade is even more attractive while major currencies are confined to such tight ranges.'The carry trade is one way for people to make money in a rangebound market,' he said.Unless there is any significant improvement in Japanese economic data which will suggest that interest rates could be set to rise, the yen will remain under pressure, Maratheftis believes.The Japanese currency was also pressured by comments made overnight by Bank of Japan board member Kiyohiko Nishimura, who downplayed the possibility that very low interest rates left too long could distort the economy, further suggesting that the central bank has no intention to raise rates as yet.Meanwhile, the weakness of the yen and support for carry trades boosted the Australian dollar, rising to 2-week highs against the US dollar and multi-year highs against the yen.The Australian currency has also been boosted by last night's stronger-than-expected data on Australian capital expenditure and favourable M&A deals, including news that Mexico's Cemex has increased its stake in Australia's Rinker Group.Elsewhere, the pound was slightly firmer as a stronger-than-expected GfK consumer confidence survey and a sharp jump in the prices element in the latest CBI distributive trades survey offset earlier weaker-than-expected UK mortgage lending and approvals data.London 1541 GMT London 1115 GMTUS dollaryen 121.78 up from 121.58sfr 1.2249 down from 1.2261cad 1.0692 down from 1.0694Eurousd 1.3453 up from 1.3440stg 0.6795 down from 0.6796yen 163.85 up from 163.43sfr 1.6483 up from 1.6481Sterlingusd 1.9796 up from 1.9777yen 241.08 up from 240.46sfr 2.4249 down from 2.4251Australian dollarusd 0.8270 up from 0.8243stg 0.4176 up from 0.4166yen 100.73 up from 100.24New Zealand dollarusd 0.7362 up from 0.7329jessica.mortimer@thomson.comjkm/cmlCOPYRIGHTCopyright AFX News Limited 2007. All rights reserved.The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.
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Forex - US dollar mixed in Sydney afternoon, yen up on rate hike speculation 