RTTNews - Monday during Asian deals, the US dollar and the Japanese yen soared against their key counterparts as a plunge in Asian stocks boosted demand for perceived safe haven currencies. Investors remained jittery on renewed worries about the global economy after euro-zone economy suffered a record 2.5 percent contraction in the first quarter.
The dollar and the yen are viewed as safe-haven currencies and both currencies rise, when investors turned risk averse and fell when risk appetite improves.
In early trading, the Australian benchmark index S&P/ASX 200 is down by nearly 50 points at 3,723. The All Ordinaries index is trading 51.70 points or 1.38% down at 3,707. In New Zealand, the NZX 50 is trading modestly lower at 2,784.97. The Nikkei 225 average of the Japanese stock market was down by 264.67 points or 2.86% at 9,000 at the end of the morning session. These markets are trading taking cues from the Wall Street where, the Dow closed down 62.68 points or 0.8 percent at 8,268.64, the Nasdaq closed down 9.07 points or 0.5 percent at 1,680.14 and the S&P 500 closed down 10.19 points or 1.1 percent at 882.88.
Monday morning in Asia, the yen continued to creep higher versus the dollar, jumping to a near 2-month high of 94.57, compared to 95.08 hit late Friday in New York. If the yen moves up further, it may test resistance around the 93.6 level.
The yen soared to a 13-year high of 87.13 versus the greenback on January 21, but moved lower thereafter. The yen dropped 13% and fell to a 4-month low of 101.46 on March 06. Since then, the yen has been gaining and it appreciated around 6.7%.
Both the yen and the dollar have come under pressure in the past month as equity markets rallied on hopes that the worst of the global downturn was over. But the rally in equity markets faded in recent days and an unexpected plunge in U.S. retail sales helped yen to gain 3% against the dollar last week.
From U.S., the economic report that may likely influence the market is NAHB housing market report for May, which is due at 1:00 pm ET. Before that, the US Treasury Secretary is to deliver a speech at Newsweek Magazine event at 11:30 am ET.
During Asian deals on Monday, the yen strengthened to 143.11 against the British pound. This set the highest point for the Japanese currency since April 29, 2009. If the yen climbs further, it may likely target the 140.8 level. The pound-yen pair closed last week's deals at 144.16.
The pound rose against the euro and the franc as the average asking price for home in Britain rose in the fourth consecutive month. The property Web site Rightmove said today that average asking price for a home in Great Britain was up for the fourth consecutive month, climbing 2.4 percent in May after a 1.8 percent gain in April. On an annual basis, home prices slipped 6.2 percent - marking the smallest decline in seven months - following the 7.6 percent contraction in April.
Against the currencies of Europe and Switzerland, the yen climbed to a 19-day high of 127.00 and a 20-day high of 84.09, respectively in early Asian deals on Monday. This may be compared to Friday's New York session closing values of 128.23 and 84.75, respectively. The next upside target level for the yen is seen at 82.7 against the franc and 124.4 against the euro.
The euro remained under selling pressure on hopes that the European central bank may slash interest rate from 1% when it meets on June 4, to spur recovery in the European economy.
Annual inflation stood at historic low in Euro-zone, as price pressures stay tilted to the downside amid slowing economic activity. The euro area GDP declined 2.5% sequentially in the first quarter of 2009 compared to a 1.6% decline in the fourth quarter. Economists were looking for a 2% fall in the first quarter. The first quarter decline was the largest since 1995. The recession in Eurozone was severe than in the U.S., where the GDP was down 1.6% sequentially in the first quarter, following a 1.6% fall in the fourth quarter of previous year.
In the European session today, the euro-zone trade balance for March has been scheduled for release.
In Asian trading today, the yen also gained against commodity related currencies namely the kiwi, the Aussie and the loonie.
The Japanese unit surged higher versus the New Zealand dollar, rising to an 18-day high of 55.27. On the upside, 54.7 is seen as the next target level for the yen. The kiwi-yen pair was worth 55.77 at last week's close.
On the economic front, Statistics New Zealand reported that producer input prices fell 2.5 percent and output prices fell 1.4 percent in the first quarter of 2009. Lower prices for imported crude oil and for fuel made major contributions to the fall in input prices, while lower prices in the dairy product manufacturing index drove down output prices. The 2.5 percent fall in the inputs index is the largest since the series began in the December 1977 quarter, the bureau said.
Against its Australian counterpart, the yen advanced to an 18-day high of 70.56 in Asian deals on Monday, compared to Friday's closing value of 71.28. The next upside target level for the Japanese currency is seen at 68.00 against the Aussie.
Against the Canadian currency, the Japanese yen has gained around 7% since last Monday to hit a 19-day high of 80.19 today. If the yen ticks up further, the next likely resistance is seen around the 79.01 level. At Friday's North American session close, the loonie-yen pair was worth 80.62.
The dollar climbed against other major currencies as a fall in stock prices prompted investors to flock to their perceived safety. The dollar rose against other major currencies on Friday amid a mixed bag of US economic reports. Industrial production fell by a little less than expected, while consumer prices remained unchanged in the month of April
The dollar strengthened in Monday's early trading versus the euro and climbed to a 10-day high of 1.3425. If the dollar rises further, 1.33 is seen as the next likely target level. The euro-dollar pair closed Friday's deals at 1.3488.
The US currency rallied to a 4-day high of 1.5120 against the pound during Monday's early trading, compared to 1.5163 hit late Friday in New York. On the upside, the next likely target for the US dollar is seen around the 1.497 level.
Against the currency of Switzerland, the US dollar spiked up to a 10-day high of 1.1264 during today's early trading. If the greenback rises further, 1.133 is seen as the next target level. At yesterday's New York session close, the pair was quoted at 1.1225.
The US dollar also traded higher against the commodity related currencies during this time period. The dollar climbed to 0.5837 against the New Zealand dollar, from Friday's closing value of 0.5865.
Against the Canadian dollar and the Australian dollar, the greenback hit a 12-day high of 1.1817 and 0.7454, compared to last week's closing values of 1.1800 and 0.7497, respectively.
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