Dollar rose from Tuesday's 15-year low of 83.58 against the Japanese yen on Wednesday due to speculation that Japanese authorities will act to counter the Japanese yen's strength.
The greenback ratcheted higher from 83.91 in Asia after Tuesday's selloff to a fresh 15-year low of 83.58 and rose to 84.51 in reaction to various statements by Japanese officials. Later, although dollar rose again after minor retreat and climbed to a high of 84.68, price pared its gains from there after the release of much smaller-than-expected U.S. durable goods data. The greenback then fell to 84.04 after the release of weaker-than-expected U.S. housing data, however, the pair staged a strong rebound from there and climbed to an intra-day high of 84.83 in NY afternoon partly due to the bounce in U.S. stocks (DJI once dropped by more than 100 points and eventually pared all the initial losses and closed the day up by 19.61 or 0.2% at 10060).
U.S. durable goods showed a much smaller-than-expected rise of 0.3% in July instead of the economists' forecast of an increase of 2.8% while the revised reading in June was -0.1%. Durable goods orders excluding transportation dropped by 3.8% versus the expectations of a rise of 0.5%. U.S. new home sales fell by 12.4% to an annual rate of 0.276 million, as economists expected to remain unchanged.
Earlier, Japanese Finance Minister Noda said that the government would take appropriate action when necessary, though he planned to continue to watch currency movements very closely with great interest and his basic understanding was that movements had been one-sided. He also said that there was no specific instructions from Prime Minister on forex and he could not comment on forex intervention.
In addition, Japanese Prime Minister Kan said he wanted to show response on strong yen soon and he had a sense of crisis over strong yen.
Japanese government spokesman Senkoku said 'want to analyse forex moves with Finance Minister Noda on Wednesday afternoon; spoke with Prime Minister Kan about how to monitor markets; excessive forex moves would have negative impact on economy, financial stability; still room for the government and BOJ to act versus markets in the short-term.'
Despite euro's brief bounce to 1.2667 in Asia after Tuesday's volatile movements, the single currency weakened again to 1.2628 on concerns over eurozone banks as a report from WSJ showed that the lack of uniform disclosures by individual banks made investors difficult to monitor how heavily exposed each bank was to various European countries. Later, although euro rose briefly and strongly to 1.2727 on short-covering after the release of stronger-than-expected German Ifo data, the pair fell again to an intra-day low of 1.2608 due to renewed risk aversions as Greek/German 10-year government bond yield spread widened about 35 basis points to 945 basis points, the highest since May 10. However, euro rebounded briefly to 1.2678 after the release of weaker-than-expected U.S. new home sales data before stabilising.
IFO said German business climate index in August was 106.7, which was higher than Reuters consensus of 105.7 and the previous reading in July of 106.2.
Although the British pound rose from Tuesday's low of 1.5389 to 1.5444 in Asia, selling interest at there sent cable lower to 1.5389 again. Later, cable rose again to 1.5462 in European morning in tandem with euro on the stronger-than-expected German Ifo data and then climbed to an intra-day high of 1.5472 in NY before retreating.
The single currency fell below 1.3000 against the Swiss franc on risk aversions and dropped to a fresh record low of 1.2971.
Economic data to be released on Thursday include: Germany Gfk index, Swiss Employment Level, Employment Level, U.K. CBI distribution trade, U.S. Jobless claims, Midwest manufacturing.