The Dollar is still reeling from the 50 basis point rate cut imposed by the Fed last month. Nonetheless, some analysts are predicting that the Fed will cut rates again on October 31, this time by a quarter of a percentage point, to 4.5%. The looming fall in real estate prices (termed the sub-prime crisis) has officially spread to the rest of the economy, and the Fed is trying to preempt a complete collapse in investor and consumer confidence. Experts remain divided as to whether the Fed will cut rates now or next month. Either way, you can expect the Dollar to drop to fresh lows against the Euro. Thomson Financial reports:
“The combination of weak US data, rising expectations of aggressive Fed easing and a stable, albeit fragile, Wall Street is a perfect recipe for euro-US dollar and Australian dollar-US dollar strength,” said one analyst.
Read More: US dollar hovers near all-time low vs euro on chances of Fed rate cut
Tuesday, October 30, 2007
Saturday, October 27, 2007
Treasurys close mixed in erratic day
Long-term Treasury prices closed mixed on Friday after an uneven session largely spent reacting to the stock market.
Long-term Treasury prices reversed course several times Friday, moving lower as the stock market powered ahead, then rising at points when the equities rally seemed to falter. Low-risk Treasurys often are in demand when stocks seem too risky to investors. But on Friday stocks were more in favor, although trade was choppy in both markets.
Bond investors remain focussed on worries that the rising defaults on home loans and other credit problems will weaken the broader economy.
By contrast, stocks rallied Friday after home lender Countrywide Financial delivered an upbeat outlook. That news suggested to some that a turning point might be near for the ailing mortgage industry, which would help stabilize the housing and consumer sectors.
"I'm not sure the bond guys believed the reasoning in the stock market," said Kim Rupert, managing director of fixed income at Action Economics. "Every time prices dipped lower, bargain hunters stepped in and picked up a little extra insurance."
The benchmark 10-year Treasury note fell 4/32 to 102 27/32 with a yield of 4.39 percent, up from 4.38 percent at Thursday's close. Prices and yields move in opposite directions.
The 30-year long bond dropped 6/32 to 105 with a 4.69 percent yield, little changed from Thursday's close.
There was demand for short-term notes. The 2-year note rose 4/32 to 99 24/32 with a 3.76 percent yield, down from 3.78 percent at its Thursday close.
After hours selling sent the 10-year yield up to 4.41 percent at 5:30 p.m. from 4.39 percent at the official close, while the 30-year yield remained at 4.69 percent. Sales of the 2-year note pushed its yield up to 3.77 percent from 3.76 percent.
The yield on the 3-month note rose to 3.94 percent from 3.92 percent Thursday as the discount rate rose to 3.84 percent from 3.82 percent.
The bond market drew some strength from a poll that showed weakening consumer sentiment. The University of Michigan's consumer sentiment survey dropped to 80.9 in late October from 83.4 in September. The latest reading was below economists' forecasts and marked the weakest level since May 2006.
"The data imply that financial market turmoil and negative news headlines are continuing to weigh on sentiment," said Action Economics. Lower sentiment could lead to lower spending and dampen the overall economy.
Signs of future economic malaise increase the odds that the Federal Reserve will cut rates again at its meeting next week. Pricing of Federal funds futures contracts Friday indicated the bond market expects the Federal Reserve to drop the Fed funds rate by a quarter percentage point to 4.50 percent at its meeting next week.
The Fed last month put in place an unusual half percentage point decrease that was cheered by both the stock and bond markets.
Fed officials have said data reports will play an important role in monetary policy decisions. Many recent economic and corporate earnings reports have emphasized the damage done to banks and homeowners by last summer's severe credit contraction.
Long-term Treasury prices reversed course several times Friday, moving lower as the stock market powered ahead, then rising at points when the equities rally seemed to falter. Low-risk Treasurys often are in demand when stocks seem too risky to investors. But on Friday stocks were more in favor, although trade was choppy in both markets.
Bond investors remain focussed on worries that the rising defaults on home loans and other credit problems will weaken the broader economy.
By contrast, stocks rallied Friday after home lender Countrywide Financial delivered an upbeat outlook. That news suggested to some that a turning point might be near for the ailing mortgage industry, which would help stabilize the housing and consumer sectors.
"I'm not sure the bond guys believed the reasoning in the stock market," said Kim Rupert, managing director of fixed income at Action Economics. "Every time prices dipped lower, bargain hunters stepped in and picked up a little extra insurance."
The benchmark 10-year Treasury note fell 4/32 to 102 27/32 with a yield of 4.39 percent, up from 4.38 percent at Thursday's close. Prices and yields move in opposite directions.
The 30-year long bond dropped 6/32 to 105 with a 4.69 percent yield, little changed from Thursday's close.
There was demand for short-term notes. The 2-year note rose 4/32 to 99 24/32 with a 3.76 percent yield, down from 3.78 percent at its Thursday close.
After hours selling sent the 10-year yield up to 4.41 percent at 5:30 p.m. from 4.39 percent at the official close, while the 30-year yield remained at 4.69 percent. Sales of the 2-year note pushed its yield up to 3.77 percent from 3.76 percent.
The yield on the 3-month note rose to 3.94 percent from 3.92 percent Thursday as the discount rate rose to 3.84 percent from 3.82 percent.
The bond market drew some strength from a poll that showed weakening consumer sentiment. The University of Michigan's consumer sentiment survey dropped to 80.9 in late October from 83.4 in September. The latest reading was below economists' forecasts and marked the weakest level since May 2006.
"The data imply that financial market turmoil and negative news headlines are continuing to weigh on sentiment," said Action Economics. Lower sentiment could lead to lower spending and dampen the overall economy.
Signs of future economic malaise increase the odds that the Federal Reserve will cut rates again at its meeting next week. Pricing of Federal funds futures contracts Friday indicated the bond market expects the Federal Reserve to drop the Fed funds rate by a quarter percentage point to 4.50 percent at its meeting next week.
The Fed last month put in place an unusual half percentage point decrease that was cheered by both the stock and bond markets.
Fed officials have said data reports will play an important role in monetary policy decisions. Many recent economic and corporate earnings reports have emphasized the damage done to banks and homeowners by last summer's severe credit contraction.
Thursday, October 25, 2007
Commentary: Will the US Intervene on Behalf of the Dollar?
At last week’s G8 meeting in Washington, it was expected that currencies would be a hot topic of discussion. With the Dollar retreating to record lows on a daily basis, the failure of China to allow the Yuan to appreciate, the Japanese Yen’s continued weakness despite its strong economy, and the recent parity of the Canadian Dollar and USD, there are certainly plenty of forex phenomena that deserve attention. However, it is the Euro/USD relationship that probably received the most scrutiny, as the biggest contingent of the G8 uses the Euro.
European politicians and bureaucrats have spent the last few months arguing with America-as well as amongst themselves-over the declining Dollar. The consensus is certainly that the Dollar is harming the European economies; as one German Minister phrased it, the “pain threshold” has been crossed. At the same time, it is clear that a relatively weak Dollar is probably in the best interest of global economic stability, since the US current account and financial account imbalances can only be solved by changes in exchange rates. Thus, there is a growing divide between European politicians, who tend to think in provincial terms, and the European Central Bank, which is more focused on the Big Picture. The new President of France, for example, has been quite vocal in lamenting the appreciation of the Euro, even going so far as to demand the ECB step in. Jean Claude Trichet, president of the ECB, responded by calling on European politicians to be circumspect in their comments on the Euro.
However, since Central Banks do not participate in G8 conferences, you can bet that politicians hounded Hank Paulson, US Secretary of the Treasury, on the declining Dollar. Some analysts have even speculated that ‘intervention’ would enter into the discussions. In fact, the US has not intervened in forex markets since 1994, when Europe and American worked in tandem to prop up a then-ailing Dollar. After a couple months, however, the plan was abandoned due to mixed results. Is it possible that the US, confronted with the same situation, will once again attempt intervention?
The answer is “not likely.” First, the Europeans are not even united in their position on the USD/Euro exchange rate. Secretly, they would probably all prefer a stronger Dollar, but in public, only a handful have called for intervention. Second, short of fixing the exchange rate (which would require the US to borrow money), it is very difficult for a government/central bank to control its currency. Recent intervention by South Korea and Japan, as well as America’s efforts in 1994, ended in failure. Finally, there is the issue of China, which does control its currency. The US would surely appear hypocritical if it intervened on behalf of the Dollar while simultaneously encouraging China to float the Yuan. Thus, while certain US economic concessions may result of the G8 conference, a controlled appreciation of the Dollar will not likely be one of them.
European politicians and bureaucrats have spent the last few months arguing with America-as well as amongst themselves-over the declining Dollar. The consensus is certainly that the Dollar is harming the European economies; as one German Minister phrased it, the “pain threshold” has been crossed. At the same time, it is clear that a relatively weak Dollar is probably in the best interest of global economic stability, since the US current account and financial account imbalances can only be solved by changes in exchange rates. Thus, there is a growing divide between European politicians, who tend to think in provincial terms, and the European Central Bank, which is more focused on the Big Picture. The new President of France, for example, has been quite vocal in lamenting the appreciation of the Euro, even going so far as to demand the ECB step in. Jean Claude Trichet, president of the ECB, responded by calling on European politicians to be circumspect in their comments on the Euro.
However, since Central Banks do not participate in G8 conferences, you can bet that politicians hounded Hank Paulson, US Secretary of the Treasury, on the declining Dollar. Some analysts have even speculated that ‘intervention’ would enter into the discussions. In fact, the US has not intervened in forex markets since 1994, when Europe and American worked in tandem to prop up a then-ailing Dollar. After a couple months, however, the plan was abandoned due to mixed results. Is it possible that the US, confronted with the same situation, will once again attempt intervention?
The answer is “not likely.” First, the Europeans are not even united in their position on the USD/Euro exchange rate. Secretly, they would probably all prefer a stronger Dollar, but in public, only a handful have called for intervention. Second, short of fixing the exchange rate (which would require the US to borrow money), it is very difficult for a government/central bank to control its currency. Recent intervention by South Korea and Japan, as well as America’s efforts in 1994, ended in failure. Finally, there is the issue of China, which does control its currency. The US would surely appear hypocritical if it intervened on behalf of the Dollar while simultaneously encouraging China to float the Yuan. Thus, while certain US economic concessions may result of the G8 conference, a controlled appreciation of the Dollar will not likely be one of them.
Wednesday, October 10, 2007
Forex Procurement - Govt Accuses Top Officials of Shady Deals
Lagos State government has accused its senior officials who travel abroad of procuring their foreign exchange requirement through the black market.
In a circular No 238, titled "Purchase of Foreign Eexchange," issued by Lagos State Head of Service, Alhaji Yakubu Balogun, government said it "observed that in most cases when some senior government officials and other senior members of staff had cause to travel abroad on official assignments, they procure their foreign exchange requirement from unapproved sources."
The two-page circular dated September 24, 2007, copies of which were sent to the state Deputy Governor, Speaker of the State House of Assembly, Commissioiners and Secretary to the State Government among others, said, "Governor Babatunde Fashola has, therefore, advised the officials who are in the habit of procuring forex illegally to henceforth procure their foreign exchange directly from banks or licenced bureaux de-change."
"The governor's advise was informed by the need to prevent any embarassment for the officials and the state government, because of the risk of purchasing counterfeit notes.
"In addition, any top government official carrying more foreign exchange than the legal limit must declare such at the port of exit and entry", the circular added.
In a circular No 238, titled "Purchase of Foreign Eexchange," issued by Lagos State Head of Service, Alhaji Yakubu Balogun, government said it "observed that in most cases when some senior government officials and other senior members of staff had cause to travel abroad on official assignments, they procure their foreign exchange requirement from unapproved sources."
The two-page circular dated September 24, 2007, copies of which were sent to the state Deputy Governor, Speaker of the State House of Assembly, Commissioiners and Secretary to the State Government among others, said, "Governor Babatunde Fashola has, therefore, advised the officials who are in the habit of procuring forex illegally to henceforth procure their foreign exchange directly from banks or licenced bureaux de-change."
"The governor's advise was informed by the need to prevent any embarassment for the officials and the state government, because of the risk of purchasing counterfeit notes.
"In addition, any top government official carrying more foreign exchange than the legal limit must declare such at the port of exit and entry", the circular added.
Tuesday, October 9, 2007
Forex gains to play smaller role in driving surprises
NEW DELHI: Forex gains, which were a key driver of positive surprises last quarter, will be less of a factor this quarter, as the rupee has appreciated by a modest 2% during the September 2007 quarter.
After a robust first quarter, Citigroup expects Sensex ex-oil earnings to rise by 21% in the second quarter. With base effect and slowing credit, trend of top line moderation is expected to continue and is expected at 13%. Margins should hold steady overall, despite challenges of wage inflation and currency appreciation for many sectors.
A liquidity surge after the Fed rate cut has driven a stunning 27% rise in the Sensex from lows just six weeks back. Positive earnings surprises will be key to hold up that momentum. The previous quarter’s earnings surprises, outside the capital goods sector, were mostly from forex gains and hence it did not drive any significant earnings revision. Earnings surprises are expected to remain on a slow track, though positive.
Leading sectors in terms of profit growth are likely to be telecom, media, brokerages, hotels, capital goods while sugar, textiles, metals, autos and pharma will likely be laggards this quarter.
The previous results season had seen well above expected profit growth, but much of the earnings surprise outside of capital goods came from forex gains and other one-offs. Not surprisingly, despite a strong June 2007 quarter, earnings upgrade momentum has been very muted and Sensex ex-oil earnings growth for fiscal 2008 and 2009 is still expected to be 16-17 %, says Citigroup.
With the rupee appreciating merely 2.1% versus the dollar in the September quarter (6.1% in the preceding quarter), forex gains will play a far smaller role in driving surprises this time around.
After a robust first quarter, Citigroup expects Sensex ex-oil earnings to rise by 21% in the second quarter. With base effect and slowing credit, trend of top line moderation is expected to continue and is expected at 13%. Margins should hold steady overall, despite challenges of wage inflation and currency appreciation for many sectors.
A liquidity surge after the Fed rate cut has driven a stunning 27% rise in the Sensex from lows just six weeks back. Positive earnings surprises will be key to hold up that momentum. The previous quarter’s earnings surprises, outside the capital goods sector, were mostly from forex gains and hence it did not drive any significant earnings revision. Earnings surprises are expected to remain on a slow track, though positive.
Leading sectors in terms of profit growth are likely to be telecom, media, brokerages, hotels, capital goods while sugar, textiles, metals, autos and pharma will likely be laggards this quarter.
The previous results season had seen well above expected profit growth, but much of the earnings surprise outside of capital goods came from forex gains and other one-offs. Not surprisingly, despite a strong June 2007 quarter, earnings upgrade momentum has been very muted and Sensex ex-oil earnings growth for fiscal 2008 and 2009 is still expected to be 16-17 %, says Citigroup.
With the rupee appreciating merely 2.1% versus the dollar in the September quarter (6.1% in the preceding quarter), forex gains will play a far smaller role in driving surprises this time around.
Friday, October 5, 2007
Dollar gains against euro on signs US economy recovering from subprime
HONG KONG (Thomson Financial) - The US dollar gained against the euro in afternoon trade in Asia on Thursday, on signs that the US economy is recovering from the subprime mortgage crisis, reducing chances that the Federal Reserve would further cut interest rates.
Recent economic data showed that the services industries continued to grow in September, while most investors are predicting that Friday's jobs report will show that the labor market has added 100,000 new jobs after an unexpected 4,000-job decline in August.
'Now, the market is beginning to doubt whether there will be another rate cut, especially if we see a strong jobs report tomorrow,' said Mark Wan, vice president for treasury at DBS Bank in Hong Kong.
'If the jobs figures are strong, then the dollar may rebound' to the 1.39 level against the euro, Wan said. 'This is the good opportunity to buy the dollar.'
At 1 pm, the euro shed earlier gains and was trading at 1.4090 dollars, down from 1.4097 in Sydney this morning. The euro, which traded at 1.4085 dollars in late New York trade, fell to as low as 1.4079 dollars at noon .
The dollar was trading at 116.48 yen, down from 116.74 this morning and from 116.75 late last night.
'The credit market in the US is stabilizing and the equity market is getting stronger, so there is very little momentum for the euro to appreciate against the dollar,' said Thomas Lam, treasury economist at United Overseas Bank (other-otc: UOVEY.PK - news - people ) in Singapore.
Both Wan and Lam are predicting the Fed will follow its Sept 18 half -point rate cut with another quarter point reduction by year end.
'If the Fed indeed cut its rates, then it won't hurt the dollar anymore because that has been largely discounted by the market,' Wan said.
'But if they don't reduce the rates, then that will provide a very strong support for the dollar,' Wan said.
Concerns aired by European policy makers, politicians and businessmen on a strong euro are also weighing down the euro, Wan said.
The European Central Bank is expected to keep its interest rate unchanged at 4 percent when policymakers announce a decision later today.
The yen's gains against the dollar were anchored on optimism that the US economy will not slip into a recession, helping boost demand for Japanese cars, computers and other goods.
'If the US continues to grow, that will benefit the yen,' Wan said, who is forecasting the yen to rise to 114 to the dollar by year end.
Japan ships about 20 percent of its total exports to the US.
John Noonan, an analyst at Thomson IFR, said traders are supporting the dollar in anticipation of a strong rebound in non-farm payroll figures. But an increase of less than 100,000 might see the greenback ''start to swoon lower again''.
Still, the immediate risk to the dollar is the European Central Bank and Bank of England meetings on Thursday.
While both banks are expected to hold rates at current levels, the dollar could come under pressure if European Central Bank head Jean-Claude Trichet indicates a tightening bias.
Recent economic data showed that the services industries continued to grow in September, while most investors are predicting that Friday's jobs report will show that the labor market has added 100,000 new jobs after an unexpected 4,000-job decline in August.
'Now, the market is beginning to doubt whether there will be another rate cut, especially if we see a strong jobs report tomorrow,' said Mark Wan, vice president for treasury at DBS Bank in Hong Kong.
'If the jobs figures are strong, then the dollar may rebound' to the 1.39 level against the euro, Wan said. 'This is the good opportunity to buy the dollar.'
At 1 pm, the euro shed earlier gains and was trading at 1.4090 dollars, down from 1.4097 in Sydney this morning. The euro, which traded at 1.4085 dollars in late New York trade, fell to as low as 1.4079 dollars at noon .
The dollar was trading at 116.48 yen, down from 116.74 this morning and from 116.75 late last night.
'The credit market in the US is stabilizing and the equity market is getting stronger, so there is very little momentum for the euro to appreciate against the dollar,' said Thomas Lam, treasury economist at United Overseas Bank (other-otc: UOVEY.PK - news - people ) in Singapore.
Both Wan and Lam are predicting the Fed will follow its Sept 18 half -point rate cut with another quarter point reduction by year end.
'If the Fed indeed cut its rates, then it won't hurt the dollar anymore because that has been largely discounted by the market,' Wan said.
'But if they don't reduce the rates, then that will provide a very strong support for the dollar,' Wan said.
Concerns aired by European policy makers, politicians and businessmen on a strong euro are also weighing down the euro, Wan said.
The European Central Bank is expected to keep its interest rate unchanged at 4 percent when policymakers announce a decision later today.
The yen's gains against the dollar were anchored on optimism that the US economy will not slip into a recession, helping boost demand for Japanese cars, computers and other goods.
'If the US continues to grow, that will benefit the yen,' Wan said, who is forecasting the yen to rise to 114 to the dollar by year end.
Japan ships about 20 percent of its total exports to the US.
John Noonan, an analyst at Thomson IFR, said traders are supporting the dollar in anticipation of a strong rebound in non-farm payroll figures. But an increase of less than 100,000 might see the greenback ''start to swoon lower again''.
Still, the immediate risk to the dollar is the European Central Bank and Bank of England meetings on Thursday.
While both banks are expected to hold rates at current levels, the dollar could come under pressure if European Central Bank head Jean-Claude Trichet indicates a tightening bias.
Wednesday, October 3, 2007
HLB unveils real time forex rates
KUALA LUMPUR: Hong Leong Bank Bhd's (HLB) wholesale banking division yesterday launched the Reuters Electronic Trading and Automated Dealing system (RET-AD) to distribute live streaming foreign exchange (forex) rates to its branches.
Chief operating officer of wholesale banking Kua Wei Jin said the system had been implemented in 20 branches, mainly in the Klang Valley.
During the progressive roll out in the past six months, the volume of transactions in the 20 branches had picked up, he told reporters after the launch yesterday.
“Further roll-out will depend on supply and demand over two to three years,” he said.
Reuters Malaysia managing director Simon Soo Hu said HLB would be among the first five major banks in Malaysia to adopt the RET-AD system.
Two banks in Malaysia had gone “live”, and apart from HLB, two more banks would be coming online soon, he added.
Among the system's multinational users are financial institutions such as JP Morgan and UBS.
In his speech, Soo said RET-AD allowed financial institutions such as HLB and their customers to conduct real-time online foreign exchange and money market transactions.
According to a Reuters estimates statement, the majority of the daily volume of foreign exchange transactions totalling US$5bil was predominantly trade related.
HLB in a press statement said the live streaming forex rates through the RET-AD system was a key component in its plan to grow its treasury business in Malaysia.
The statement added that ultimately, the intention to automate forex prices was for corporate clients to be able to hedge real-time foreign exchange positions by accessing the bank's website from any standard internet browser on their internal systems.
Chief operating officer of wholesale banking Kua Wei Jin said the system had been implemented in 20 branches, mainly in the Klang Valley.
During the progressive roll out in the past six months, the volume of transactions in the 20 branches had picked up, he told reporters after the launch yesterday.
“Further roll-out will depend on supply and demand over two to three years,” he said.
Reuters Malaysia managing director Simon Soo Hu said HLB would be among the first five major banks in Malaysia to adopt the RET-AD system.
Two banks in Malaysia had gone “live”, and apart from HLB, two more banks would be coming online soon, he added.
Among the system's multinational users are financial institutions such as JP Morgan and UBS.
In his speech, Soo said RET-AD allowed financial institutions such as HLB and their customers to conduct real-time online foreign exchange and money market transactions.
According to a Reuters estimates statement, the majority of the daily volume of foreign exchange transactions totalling US$5bil was predominantly trade related.
HLB in a press statement said the live streaming forex rates through the RET-AD system was a key component in its plan to grow its treasury business in Malaysia.
The statement added that ultimately, the intention to automate forex prices was for corporate clients to be able to hedge real-time foreign exchange positions by accessing the bank's website from any standard internet browser on their internal systems.
Monday, October 1, 2007
Euro comes off fresh-all time high against dollar after in-line PMI
LONDON, Oct. 1, 2007 (Thomson Financial delivered by Newstex) -- The euro was off a fresh all-time high against the dollar after an in-line manufacturing survey, with last week's soft US data continuing to weigh on the greenback.
The Purchasing Managers' manufacturing index for the 13-nation single currency area confirmed the earlier flash estimate reading of 53.2, down from 54.3 in August. This was in-line with analyst expectations and suggested that business sentiment is starting to wane, pushing the euro away from the all-time high of 1.4282 usd it hit in overnight Asian trade.
The main focus in the euro zone this week will be on the European Central Bank's interest rate decision. Analysts expect the ECB to remain on hold - however close attention will be on the subsequent press conference to see if the tightening bias remains in-tact.
Gavin Friend, currency analyst at Commerzbank said if ECB president Jean-Claude Trichet made any negative comments about the strength of the euro - something he has so far refrained from doing - then it could put a halt to the currency's ascendency.
But he added that 'only a pronounced fall of risk appetite could lead to a sustainable and stronger correction of the euro, which we currently do not expect.'
Meanwhile the dollar remained weak, with last Friday's softer than expected Michigan consumer confidence survey added to expectations that the US economy is entering a prolonged slowdown, and that further Federal Reserve rate cuts are on the cards.
'Investors will stay bearish to the dollar in the short term if US data continues to disappoint, if ECB officials stay hawkish and if G7 officials fail to give stronger signals on currency markets ahead of this month's meeting
on Oct 20-21,' said Geoffrey Wu, currency strategist at UBS. (NYSE:UBS)
Focus this week is likely to be on Friday's payrolls report to see if last month's surprise fall in jobs is repeated.
Meanwhile the yen was weaker as investors sold the Japanese currency to buy higher-yielding ones despite a stronger than expected manufacturing survey.
The Tankan report showed confidence among large Japanese manufacturers held flat for the second straight quarter in the third quarter, with strong confidence about sustained profit growth weighing against uncertainty about the subprime loan problem and the direction of financial markets.
'Overall, however, the tone of the survey was that businesses were not overly perturbed by the fallout from the US sub-prime market,' said Daragh Maher, currency strategist at Calyon.
'But with yield appetite back with a vengeance for now, the yen will likely remain on the back foot against all bar the dollar,' he added.
Finally the pound was stronger ahead of a series of lending figures from the Bank of England and a key manufacturing survey.
The Purchasing Managers' Manufacturing Index is expected to show a slight easing in the sector's growth rate to 55.7 from 56.3 in August. Meanwhile analysts anticipate figures from the BoE showing a slowdown in mortgage and unsecured lending during August as the turmoil in the credit markets pushed up lending rates.
London 0822 GMT London 0300 GMT
US dollar
yen 115.51 up from 115.03
sfr 1.1710 up from 1.1650
Euro
usd 1.4221 down from 1.4261
yen 164.24 up from 164.08
sfr 1.6648 up from 1.6615
stg 0.6954 down from 0.6972
Sterling
usd 2.0445 down from 2.0450
yen 236.12 up from 235.28
sfr 2.3938 up from 2.3825
Australian dollar
usd 0.8898 unchanged 0.8898
stg 0.4350 down from 0.4351
yen 102.72 up from 102.38
The Purchasing Managers' manufacturing index for the 13-nation single currency area confirmed the earlier flash estimate reading of 53.2, down from 54.3 in August. This was in-line with analyst expectations and suggested that business sentiment is starting to wane, pushing the euro away from the all-time high of 1.4282 usd it hit in overnight Asian trade.
The main focus in the euro zone this week will be on the European Central Bank's interest rate decision. Analysts expect the ECB to remain on hold - however close attention will be on the subsequent press conference to see if the tightening bias remains in-tact.
Gavin Friend, currency analyst at Commerzbank said if ECB president Jean-Claude Trichet made any negative comments about the strength of the euro - something he has so far refrained from doing - then it could put a halt to the currency's ascendency.
But he added that 'only a pronounced fall of risk appetite could lead to a sustainable and stronger correction of the euro, which we currently do not expect.'
Meanwhile the dollar remained weak, with last Friday's softer than expected Michigan consumer confidence survey added to expectations that the US economy is entering a prolonged slowdown, and that further Federal Reserve rate cuts are on the cards.
'Investors will stay bearish to the dollar in the short term if US data continues to disappoint, if ECB officials stay hawkish and if G7 officials fail to give stronger signals on currency markets ahead of this month's meeting
on Oct 20-21,' said Geoffrey Wu, currency strategist at UBS. (NYSE:UBS)
Focus this week is likely to be on Friday's payrolls report to see if last month's surprise fall in jobs is repeated.
Meanwhile the yen was weaker as investors sold the Japanese currency to buy higher-yielding ones despite a stronger than expected manufacturing survey.
The Tankan report showed confidence among large Japanese manufacturers held flat for the second straight quarter in the third quarter, with strong confidence about sustained profit growth weighing against uncertainty about the subprime loan problem and the direction of financial markets.
'Overall, however, the tone of the survey was that businesses were not overly perturbed by the fallout from the US sub-prime market,' said Daragh Maher, currency strategist at Calyon.
'But with yield appetite back with a vengeance for now, the yen will likely remain on the back foot against all bar the dollar,' he added.
Finally the pound was stronger ahead of a series of lending figures from the Bank of England and a key manufacturing survey.
The Purchasing Managers' Manufacturing Index is expected to show a slight easing in the sector's growth rate to 55.7 from 56.3 in August. Meanwhile analysts anticipate figures from the BoE showing a slowdown in mortgage and unsecured lending during August as the turmoil in the credit markets pushed up lending rates.
London 0822 GMT London 0300 GMT
US dollar
yen 115.51 up from 115.03
sfr 1.1710 up from 1.1650
Euro
usd 1.4221 down from 1.4261
yen 164.24 up from 164.08
sfr 1.6648 up from 1.6615
stg 0.6954 down from 0.6972
Sterling
usd 2.0445 down from 2.0450
yen 236.12 up from 235.28
sfr 2.3938 up from 2.3825
Australian dollar
usd 0.8898 unchanged 0.8898
stg 0.4350 down from 0.4351
yen 102.72 up from 102.38
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