Euro surged to a 3-month high of 1.3196 on Monday due to dollar's broad-based weakness and the firmness in U.S. equities.
The single currency traded with a firm undertone in Asian morning and edged higher to 1.3090 on improved risk appetites due to the rise in Asian stock markets. Later, although euro ratcheted lower to a low of 1.3056 in European morning, buying interest there lifted price up and the rise accelerated in NY morning and extended its recent upmove to a 3-month high of 1.3196 on dollar's broad-based weakness as U.S. Dow Jones index rose by 208 points , or 1.99% to 10674.
Although the greenback dipped to 86.20 against the Japanese yen in NZ due partly to Sunday's release of weak China July PMI where the index fell for a 3rd straight month in July to a 17-month low of 51.2, dollar staged a rebound and rose an intra-day high of 86.89 on improved risk appetites due to the firmness in European equities, together with the fears that Japanese authorities might intervene Forex market after Japanese FINMIN Yoshihiko Noda's comments, and then fell again. Later, despite dollar's rebound to 86.79 after the release of better-than-expected U.S. economic data, the greenback fell again due to the dovish comments by U.S. Fed's Bernanke, which made investors concern the economic growth in U.S., and then hit a low of 86.32 before stabilising.
The European equities rallied on Monday due to the robust results from HSBC and BNP Paribas. FTSE-100, CAC-40 and DAX rose by 2.65%, 2.99% and 2.34% respectively.
U.S. construction spending rose by 0.1% versus the expectation of a decrease of 0.5% whilst ISM manufacturing rose to 57.5 against economists' forecast of 55.0.
Japanese FINMIN Yoshihiko Noda said that excessive currency moves are undesirable and can have a negative impact on the economy.
U.S. Federal Reserve Chairman Ben Bernanke said the U.S. economy is improving but has yet to recover fully, with high unemployment and a weak housing market weighing on consumers. Bernanke said the Fed believes inflation will remain subdued over the next couple of years, citing stability in measures of inflation expectations.
The British pound maintained a firm undertone in Asia and rallied in Europe on cross buying in sterling, as eur/gbp tumbled from 0.8324 to a 4-weeks low of 0.8254, together with the release of higher-than-expected U.K. CIPS manufacturing PMI which came in at 57.3 versus the economists' forecast of 57.0. Later, cable extended its rise due to the firmness in U.S. and European equities together with dollar's broad-based weakness and hit a 6-month high of 1.5907 before stabilising.
Economic data to be released on Tuesday include: Australia Retail sales, RBA rate decision, U.K. Halifax hse prices, Swiss CPI, U.K. PMI construction, EU PPI M/M, U.S. Personal consumption, Personal income, PCE core, PCE index, Factory orders, Pending home sales, Durable goods (rev.), ex. Defense (rev.), ex. Transport (rev.).