RTTNews - Tuesday in Asia, the U.S. dollar and the Japanese yen plummeted against their key counterparts as hopes of an economic recovery increased risk appetite to buy higher-yielding assets.
The dollar and the yen are viewed as safe-haven currencies and tend to attract buying when worries about the global economy and financial markets flare up, but can come under pressure when such concerns recede.
Asian stock markets are broadly higher today, taking their cue from gains on Wall Street with energy stocks buoyed by a continued rise in crude oil prices.
Japan's Nikkei 225 was up 1.9%, Australia's S&P/ASX 200 was 1.5% higher, Korea's Kospi Composite Index was up 0.8%, Hong Kong's Hang Seng was up 1.4%, China's Shanghai Composite was 0.1% higher and Taiwan shares were up 0.9%.
Japan's Nikkei average rose 1.9 percent today, and briefly it hit 10,000 as surging crude prices boosted trading houses such as Mitsubishi Corp., which deal in oil, amid growing optimism that economic recession may be easing.
The 225-issue Nikkei Stock Average gained 184.57 points, or 1.89 percent, from Monday to 9,968.04 in the morning session after briefly touching 10,000.30. The benchmark index last topped the 10,000 line on June 15, logging an intraday high of 10,126.55.
The broader Topix index of all First Section issues on the Tokyo Stock Exchange was up 14.32 points, or 1.56 percent, to 929.64.
Stock market gains are fueling risk appetite in the currency markets, sending the euro, aussie and kiwi higher.
Sentiment in Japan was helped by news that household spending in May rose 0.3% on year, up for the first time in 15 months, and beating expectations for a 1.5% decline.
But that was tempered by the release of the May jobless rate, which rose to 5.2%, the highest since September 2003, from 5.0% in April. Analysts had expected an increase of 5.1% for May.
The job-to-applicant ratio came in at a record low of 0.44, compared to forecasts for 0.45 after the 0.46 level in April.
But the number of employed persons rose from 63.22 million in April to 63.42 million in May. The job participation rate was 60.5 percent, up from 60.4 percent a month earlier.
The Organization for Economic Cooperation and Development last week forecast Japan's jobless rate will rise to an unprecedented 5.8 percent in 2010.
In Asian trading on Tuesday, the yen fell to a 2-week low of 159.97 against the pound. This may be compared to yesterday's close of 159.15. If the yen weakens further, it may likely target the 162.6 level.
The yen has declined 4% against the pound after it reached a 3-week high of 154.13 on June 23.
The yen tumbled to a 15-day low of 135.97 against the euro during Asian deals on Tuesday. The next downside target level for the Japanese currency is seen at 138. At yesterday's close, the euro-yen pair was quoted at 135.32.
The euro gained 1% against the yen yesterday after a report showed that the Euro-zone economic sentiment rose more than expected in June.
The economic sentiment indicator rose to 73.3 from an upwardly revised reading of 70.2 recorded in May. Meanwhile, economists had expected the index to rise to 71 from May's initially reported reading of 69.3.
Against the Swiss franc, the yen slipped to a 6-day low of 89.14 in Asian deals on Tuesday. On the downside, 89.8 is seen as the next target level for the yen. The franc-yen pair was worth 88.80 at Monday's New York session close.
After hitting a 1-month high of 86.89 against the franc on June 24, the yen has been declining and it has lost more than 2% thus far.
The dollar also weakened today on optimism the global slump is waning, reducing the currency's appeal as a refuge.
During Asian deals on Tuesday, the dollar plunged to 1.6663 against the pound. This set the lowest level for the dollar since June 03. If the dollar slides further, it may likely target a new multi-month low of 1.70. The pound-dollar pair closed yesterday's trading at 1.6567.
The pound rose as U.K. consumers became much more upbeat about the economy's prospects over the next 12 months in June, boosting the overall measure of confidence for the fourth time in five months.
Consumers seem to believe that the measures taken by the government and the Bank of England to support the economy are likely to work, and indicating that they in turn won't cut back on spending as sharply as many economists had expected.
Polling firm GfK NOP said today that the headline measure of consumer confidence rose to -25 in June from -27 in the previous month. The index was in line with economists' expectations. At the same time, the index came in better than the minus 34 registered in June last year.
The dollar plummeted to a 7-month low of 1.6666 against the pound on June 03. Although the dollar gained thereafter, it pulled back again after reaching a 12-day high of 1.5805 on June 08.
However, the pound-dollar pair largely bounced between 1.6212 and 1.6623 for the past two weeks, but the pair moved off the range today.
The dollar slumped to a 4-day low of 1.0802 against the Swiss franc and a 6-day low of 1.4133 against the euro in Asian deals on Tuesday. If the dollar drops further, it may likely target 1.065 against the franc and 1.418 against the euro. The euro-dollar pair closed trading at 1.4089 and the dollar-franc pair at 1.0823 on Monday.
Extending yesterday's 1% gain, the dollar surged up against the yen in today's early Asian deals and reached a 5-day high of 96.33 at 8:05 pm ET. But the dollar fell thereafter and the pair is currently trading at 95.69, down from yesterday's New York session close of 96.06. The near term support level for the U.S. currency is seen at 95.1.
Traders are now likely to focus on the European session, in which the Swiss May UBS consumption indicator, French May PPI, German June unemployment rate, Euro-zone M3 money supply for May and CPI for June, Italian CPI for June and PPI for May, U.K. final first quarter GDP estimate and current account reports are expected.
From the U.S., the S&PCase-Shiller home price index for April and the consumer confidence report for June are due in the North American session.
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