USD
USD weakened against most currencies last week as stocks around the world rose on optimism the worst of the banking crisis is over and housing markets are showing signs of recovering, reducing appeal of the dollar as safe haven amid investor risk appetite grows. Despite recovering stock market and house markets, job market remained depress as manufacturing and service sector are still contracting and showing no signs of stalling. The dollar fell to a 2-month low versus the euro amid the greenback had its biggest loss in 1 day against the euro since 1990 after Fed unexpectedly announced that they will purchase up to 1.15Trillion worth of treasuries, pushing stocks higher while weakening the dollar as that move basically floods the market with more dollar without vivid projection that it may work whereas perceived by economists and investors, it may fail to revive the country's economy. Mass selling of the dollar last week resulted in the greenback weakening against almost all of its major trading currencies, particularly the euro where it has taken advantages despite the economy contraction in the region is worse than expected, as rising stocks and commodities lured investors appetite, reducing the need for the dollar as refuge.
Manufacturing in Philadelphia and NY region continues to contract as consumer spend less forced manufacturers to cut output and increase firing, which may persists as unemployment rise, while domestic and overseas demand for US manufacture goods decline, especially automobiles and aircraft. The dollar should recovery from past 2 week loss this week as recent decline may have been overdone giving the circumstances that economy in the Euro-zone, UK and Japan is falling faster than the US's economy. Monitor this week's US economic releases – US Existing home sales, US Richmond Fed manufacturing index, Bernanke and Geithner testify on AIG, ABC Consumer confidence, US MBA Mortgage application, US Durable goods orders, US Durable Ex transportation, US New home sales, US GDP, US Personal consumption, US Core personal consumption expenditure, US Initial jobless claims, Geithner testifies on Financial regulation, US Personal consumption expenditure deflator, US Personal income, US Personal spending and University of Michigan consumer confidence index -, cross currencies important economic releases, Fed/Treasury or other central banks' member' statements/comments, US indexes movement, news related to major corporate and speculation on any additional fiscal measures.
JPY
JPY fell against most currencies last week as stocks around the world rose on optimism the worst of banking crisis is over and as Fed and UK brought trillions worth of bonds and treasuries to bolster the region's economy, but it also flood those currencies into the market, weakening the currency, while the BOJ said it may provide as much as $10Billion of subordinated loans to banks to replenish capital depleted by falling stock prices and revive lending and will increase its purchases of government bonds from banks. US stocks remained supported last week as a report suggest the country's housing market may have bottomed out and starting to stabilize as yearlong dip in house prices lured bargain seekers. Despite recovering housing markets and banking conditions, separate figures showed manufacturing sector continues to shrink as domestic and overseas demand for US manufactured goods slides, led by automobiles.
The yen may fall against the dollar but strengthen against other currencies this week as the dollar may recover some of its losses on buying interest after recent decline and stocks in the US and EU may retreat on selling pressure amid economy in both region remain struggling despite recovery in US housing and financial markets. Monitor this week's Japan economic releases – Japan Small business confidence, Japan BSI large manufacturing, Japan Supermarket store sales, Publication of BOJ meeting minutes, Japan Adjusted merchandise trade balance, Tokyo CPI, Japan National CPI, Japan Retail trade and Japan Large retailers sales -, cross currencies important economic releases, central banks' member's statements/comments, US indexes movement, commodities performance, news related to major corporate and governments' measure/plan to stem weakening economy.
EUR
EUR rose to a 2 months high against the dollar and strengthened against most currencies last week on optimism the worst of banking crisis is over and housing markets in US expectedly rose, raising investors risk appetite and reducing demand for the dollar as refuge. Germany investor confidence unexpectedly rose to the highest level in almost 2 years in March as ECB reduced borrowing costs to a record low, while despite EU's finance ministers said they are not planning any additional measures to bolster the region economy, ECB President Trichet said policy makers are in an ongoing process of considering whether to adopt more unconventional monetary policies, raising speculation that the ECB will do more to help the region's economy despite finance ministers in EU is doing the opposite. European Union leaders, in its 2 day summit, agreed to boost funding to the IMF and are set to double a credit line for member states in financial distress as the economic crisis escalates, raising speculation the region's troubling countries will be able to get fiscal aid soon.
The euro pared its gains to 3.4% against the dollar last Friday as investors exit positions ahead of weekend and some trader bets the euro recent gain was overdone and US stocks fell, while a report showed European industrial production dropped by the most on record in January as the global recession forced companies to cut output and curb investments, gave investor the perfect reason to exit positions and take profit. The euro will retreat against the dollar and the yen this week as stock markets might fall on selling pressure and as there may be more figures will indicate further contraction in Euro-zone's economy. Monitor this week's Euro-zone economic releases – Germany Import price index, Euro-zone Trade balance, Euro-zone Construction output, France Consumer spending, France Business confidence indicator, France Production outlook indicator, France Manufacturing PMI, France Services PMI, Germany Manufacturing PMI, Germany Services PMI, Euro-zone Current account, Euro-zone Manufacturing PMI, Euro-zone Services PMI, Italy Consumer confidence index, Germany IFOs' survey. Germany Gfk consumer confidence, France Consumer confidence indicator, Italy Business confidence, Euro-zone M3, Germany CPI, France GDP, Italy Industrial orders and Euro-zone Industrial new orders -, cross currencies important economic releases, central banks' member's statements/comments, news related to major corporate and US indexes movement.
Crude oil
Crude oil rose last week as the dollar fell against the euro and rising stocks raised investors' risk appetite and lured funds into commodities market. Oil prices remained supported last week as OPEC said its' member will complete agreed supply reductions and compliance with quotas will improve to about 95% by the time the group meets in May and Fed announced plans to spend $1.15Trillion buying back debt spurred speculation that it will increase fuel demand. Oil prices slightly retreat by mid week after a government report showed a bigger than expected crude oil inventory increase on falling demand.
Crude oil inventories may post an increase again this week as fuel demand weaken and Oil Movement said OPEC will cut crude oil shipments 3.3% in the 4 weeks ending April 4 as producers seek to adhere to quotas and selling pressure remain tight by late last week as selling pressure mounts amid investor exit long positions after recent gains on profit taking and ahead of weekend. Crude oil may continue its retreat this week on as the dollar might recover on falling stock market and buying interest, but trading range are likely to be tight, between $47-$52. Monitor this week's US economic releases, central banks' member's statements/comments, news related to major corporate, US indexes movement, USD movement, geopolitical risk, major corporate fiscal results, stimulus to bolster economies and storage report.
Loh Chang Yuen,
Junior Strategist
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