Asian Market Update by TradeTheNews staff

Discussion in 'Trading' started by TradeTheNews, Feb 6, 2007.

  1. TradeTheNews

    TradeTheNews ET Sponsor

    Asian Market Update: High yielding currencies remain pressured ahead of G7 meeting

    - As expected, the Reserve Bank of Australia left interest rates unchanged at 6.25%, leading to some profit taking on the AUD. Aussie inflation has moderated over the last few weeks, but the tight labor market could raise inflationary concerns, and the market remains focused on tomorrow's January employment data. In other Aussie data, the January AiG Performance of Construction Index came in at 48.4 v 52.1 prior, as the domestic property market shows signs of cooling. The Aussie consumer remains resilient, perhaps a sign of good labor conditions, as January's Cash Card retail index came in better than the prior reading (0.9% v -0.1% prior).

    - The Chinese Yuan was set at a new post revaluation high against the USD for the second consecutive session and USD/CNY rose below the USD/HKD trading band. The record setting of the Yuan followed comments from the Fed's Yellen. Yellen said that she believes that the Chinese economy is showing signs of overheating.

    - Major forex: Forex markets were quiet during Asian trade, with few catalysts to provide direction. With EUR/USD above 1.2964, the pair's intraday outlook looks consolidative. The GBP remains supported by strong retail sales data and expectations that the Bank of England may surprise markets again with a rate hike this week. Forex market sentiment is being heavily influenced by the G7 meeting, and high yielding currencies are being sold ahead of the meeting (The NZD has been the worst performer over the last five days)

    - Asian forex: The JPY is slightly weaker on short term players taking profit after the US Treasury Sec Paulson reiterated that the JPY is not being manipulated by the Bank of Japan. The JPY is also being weighed down by Japanese officials reiterating that the JPY won't be the main topic at G7 meeting. The Korea Won is gaining ahead of tomorrow's rate decision. The market is expecting the Bank of Korea to leave rates unchanged at 4.50%. The TWD tracked initial gains in JPY and KRW, and Taiwanese exporters aren't as active as before (most of them have already sold their USDs). The HKD is tracking the stronger CNY, as investors worry about inflationary pressures that may come from a stronger CNY. The Philippine peso rallied to six-year high on the back of foreign inflows, with the peso also benefiting from the gains in other Asian currencies

    - Equities: The Nikkei 225 is lower by more than 0.90%, with over 1B shares traded v 965M during the prior morning session. Declines on the Nikkei were led by steel and electronics shares. Traders were not willing to push the Nikkei higher, as investors sold to adjust positions before next week's settlement of February Nikkei 225 options. There is also chatter of a big sell order ahead of the option settlement date for 600 contracts on the Nikkei 225 from a European institutional investor. The Kospi is lower by more than 0.30% on declines in shipbuilding stocks and profit-taking. Bucking the downward trend, shares of Posco gained more than 2% after it announced a share buyback. The ASX 200 index rose to a new all-time high above the 5900 level, as strong profit results from BHP drove the index higher. The Hang Seng is rising for the second consecutive session, led by gains in energy shares and property stocks. Taiwan equities lower for the first time in 5 sessions.

    - Commodities: Crude oil continued to rise, trading above $59 as a cold front continues to affect the U.S. Northeast. Oil prices remain supported due to speculation that oil prices had bottomed-out after hitting lows of under $50 last month. Tokyo gold traded firmer on bullish technicals and higher oil, but there was some caution ahead of the G7 meeting, with short-term players looking for a chance to take profits. Shanghai copper rose for the 1st time in 4 sessions on falling global copper inventories.