Some of the biggest overnight gainers were the risk-sensitive Australian and New Zealand dollars, which staged a recovery in the stock market after the sharp sell-off in technology stocks eased. [MKTS/GLOB]The Aussie rose 0.3% overnight, bouncing off its 200-day moving average, to trade at $0.6508 in Asian morning. The kiwi rose from a seven-month low to buy $0.5665. [AUD/]
SENSITIVE TO RISK
The Antipodean currency’s gains came despite a sharp rise in U.S. yields, which followed some encouraging U.S. labor data and hints from the Treasury Department of a future rise in debt sales.
“The market was a little more sensitive to the improvement in risk appetite,” said Rodrigo Catril, senior currency strategist at National Australia Bank, in Sydney.
However, bigger moves, and especially any sustained decline in the dollar, would require a clearer picture of the U.S. economy than is currently available, he said, with investors and policymakers flying blind as a prolonged government shutdown halts data releases.
“The dollar is trading better than the yen or the euro,” he said, referring to higher yields on US government bonds. “So for now, gravity tells you the dollar will be supported.”
The dollar gained marginally against the yen overnight and remained steady at 153.93 yen on Thursday.
BOO
The Bank of England is about to set its policy rate at 1200 GMT and while investors are not expecting a 4% cut, the policy committee is divided and the decision could be a close-run affair.
Be that as it may, a 25 basis point cut is priced in for early next year and so even if rates remain unchanged, the tone is likely to be dovish, predicting a cut in the future.
Sterling was steady at $1.3054 on Thursday after hitting a seven-month low of $1.3011 overnight. [GBP/]
“It’s hard to see the pound taking a hit on this. Even if they don’t cut… we think they will signal that one is coming,” NAB’s Catril said.
A break below $1.30 would open the way to the April low of $1.2712.
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