2013-01-08 20:50 (UTC)
XE Market Analysis
The dollar and yen moved higher in N.Y. trade on Tuesday, as risk taking levels slipped again. EUR-USD dipped under 1.3060 following rumors of an imminent France downgrade, after opening around 1.3125. USD-JPY was soft in morning trade, as profit taking continued, though perked up around mid-session on reports of a Japan public works stimulus package. There was no data to drive markets otherwise, and weakness on Wall Street ahead of the kickoff of earnings season largely led the dollar's direction.[EUR, USD]
EUR-USD broke to session lows under 1.3060 after U.S. account interest fueled profit taking by stale longs. A supranational account bid at 1.3100 was filled in the process. Talk of a France credit downgrade weighed on the euro, though was later denied by the finance ministry. Short term support is now noted at 1.3030. Players reacted to overnight news that Japan would buy ESM bonds, but it should not have a great deal of impact on FX for now as it is coming out of existing reserves. Overall, interest is lacking and one large U.S. account commenting on flows yesterday said volumes are 70% lower than usual. Afternoon dealings were light, as EUR-USD idled largely between 1.3060 and 1.3070.[USD, JPY]
USD-JPY reacted to the report of the Japanese public works package in a supplementary budget . After finding good support into 87.00 earlier, the dollar bounced back over 87.30 in relatively thin trade. Japanese bids were said to have been heavy into the figure, and intra day shorts had started paring positions ahead of the news. The headlines sped up that process. A Nikkei News headline said a Y5.2 tln public works package is being mulled as part of the Y20 tln public-private stimulus being considered under a supplementary budget designed to jump-start the economy.[GBP, USD]
Cable range players are still more inclined to sell into strength following last week's drop to 1.6010 and poor U.K. fundamentals, which continues to fuel speculation of a U.K. rating downgrade. However, at current levels there is a lack of interest. Into 1.6000 and below there are reports of corporate hedging and reserve management flows, while sellers are short term in nature until the 1.6200-50 area, where more macro fund types are noted.[USD, CHF]
USD-CHF tested the 0.9200 level after the dollar weakened overnight. USD-CHF's move lower came in lockstep on the EUR-USD squeeze up through 1.3100 and extended run on 1.3140. There was no impact from Swiss unemployment, which met expectations at 3% sa. As the dollar firmed in N.Y. trading, USD-CHF made its way back to 0.9250, though overall, rangebound conditions prevailed.[USD, CAD]
USD-CAD held above 0.9850 through the overnight session, a level which has provided good support virtually since the start of the year. Solid bids had been reported on a daily basis under the level, and in early North American trade, they were slowly being chipped away at. The pairing put in a base of 0.9844, though some short covering from London was noted. With no data from either side of the border on Tuesday, risk levels determined direction, and with stocks fading, USD-CAD recovered back over 0.9880 into the London close.