USD clocks massive gain at the start of the week, Korean regulators urge caution over Lehman
Forex: It was a blockbuster session for the greenback, and the move appears to be nothing more than stop driven. Thin conditions might have exaggerated the price action, and some traders speculate that the USD will struggle to rally this week. They point out that the USD index is showing signs of fatigue, with the index ending a five week sequence of closing the week higher than where it opened. Others argue that the market is overly long USD, which may lead to some adjustment over coming sessions. The USD will likely take direction from stocks and commodities, while few expect the upcoming FOMC minutes to have an impact on the currency. "The minutes of the August 5 FOMC meeting are likely to contain the usual warnings about inflation, but I think the Fed's views have been factored in," wrote Adam Carr at ICAP Australia. "The market isn't expecting a rate hike anytime soon and Bernanke added weight to the on-hold view just on Friday night." AUD/USD was dragged down by broad USD gains, and chartists say the main support zone for AUD/USD remains around 0.8590/95 (a break below will target 0.8505). EUR/USD is currently hovering near 1.4720, while GBP/USD trades around 1.8420 (a two year low). For USD/KRW, the KRW hit its weakest level since Dec 13, 2004, with foreigners rushing to sell the country's equities.
Latest on credit markets, financials: The Danish Central Bank and a grouping of the country's private lenders will acquire Roskilde Bank A/S after no buyers were found for the bank. This is the first Danish central bank bailout in 15 years, with the central bank injecting DKK4.5 billion (about $890M). There was no clarity on the fate of Lehman Brothers, with The London Times reporting that the Korea Development Bank (KDB) has refused to rule out bidding for Lehman Brothers. In an interview over the weekend, KDB sought to play down an earlier statement in which it had said that it was open to an approach on the bank. It said: “We are just at an early stage of privatization, and we are weak at investment banking by international standards. In the long term, we should strengthen that weakness.” Korean regulator also chipped in, urging KDB to remain cautious about an investment in the troubled U.S. investment bank. In a related development, The Guardian newspaper reports that Richard Fuld's days as Lehman Brothers chief are numbered. Whether a Lehman suitor emerges or not, well-placed sources within the bank are certain that Fuld is set to hand over the reins before the end of the year. Lastly, a Wall Street Journal article speculated that the Treasury might have to inject $200B or more in order to strengthen Fannie and Freddie if they are to hold their own without further government backing.
Equities: At 0:07 EDT Japan's Nikkei is 1.89%, the S&P/ASX200 is 1.84%, South Korea's KOSPI is 0.55%, Hong Kong's Hang Seng index is 3.11%, and the Shanghai composite index is 0.96%. The S&P500 futures contract lost -0.17% since the U.S. close, last trading at 1,290. The Nikkei 225 tracked Friday's Wall Street rally, but traders remain nervous ahead of U.S. housing data. Despite uncertainties surrounding the fate of Lehman, Freddie and Fannie, Japanese financials traded higher, with exporters also adding to the upside. In Sydney, shares of banks, airlines and resource companies pushed the S&P/ASX200 index higher, while automakers and airlines supported South Korea's KOSPI index. Chinese equities jumped higher on renewed speculation of a stimulus package, while shares listed in Hong Kong gained in a catch-up rally (markets were closed on Friday due to a typhoon).
Commodities: Nymex crude oil held steady in Asia, last trading at $114.51/bbl, with few catalysts to provide direction. Over the weekend, the Turkish government reported that the Baku-Tbilisi-Ceyhan (BTC) pipeline's oil flows have returned to normal levels (pipeline is now pumping 1M barrels of oil per day). BP added that full production may be reached next week. Spot gold lost some ground at the start of the week, last trading at $825/oz
Disclaimer: All information on this web site is subject to change. The use of this web site constitutes acceptance
of our user agreement. All publisher financial articles at
FXtree.com are those of the individual authors and do not represent trading recommendations
of FXtree.com or its staff.
