24 May 2001, 11:36 Europe FX Opening: Summary of overnight moves and what's ahead
London, May 24 (BridgeNews) - The following is a summary of overnight
moves since Europe's close, plus possible leaders for the session ahead:
KEY ISSUES:
* EUR continues to implode, EUR/JPY positions continue to weigh, drags
USD/JPY * USD continues to rally; USD/JPY attractive after EUR/JPY fall
out?
EUR/JPY bungee jump sets the tone
--Recent volatility continued overnight, with EUR/JPY dragging both
EUR/USD and USD/JPY lower before all three bounced amid unconfirmed (and
now apparently doubted) rumors of BOJ intervention.
--Japanese Finance Minister Shiokawa kick-started the volatility by
saying Wednesday's strengthening of the JPY was "OK" as it just reflected
a temporary correction in the EUR. This cancelled out a warning by
Japanese Finance Minister for International Affairs Kuroda that recent FX
moves do not reflect fundamentals, and slammed EUR/JPY down to a 5-month
low of 101.04. USD/JPY tumbled in tandem to a 2 1/2 month low of 118.80.
Talk of BOJ intervention then saw EUR/JPY snap back to as high as
103.60-65 and USD/JPY recover to 120.05-10.
However, some traders claim the rebound was fuelled by bids in defence of
a 101.00 option play. CNBC also reports that Shiokawa returned to say he
was watching FX markets closely, but that he preferred a hands-off
approach. On the data front, Japanese April chain store sales fell 5.5% on
the year, while department store sales were unchanged on the year. BOJ's
Taketomi said it would be difficult for the BOJ to decide on additional
policy easing at the moment.
--After dropping to a 6-month low of 0.8480 on rumored U.S. hedge fund
sales, EUR/USD bounced back with EUR/JPY to as high as 0.8574. CNBC
reports talk the BBK bought EUR for commercial purposes. The U.S. Senate
finally passed the Bush administration's tax cut plan late Tuesday. Also
after Europe's close, German Finance Minister Eichel said German price
pressures were temporary. The Financial Times, meantime, said in an
editorial that the ECB should stand ready to ease policy. Volumes are
likely to be reduced in Europe by a holiday across much of the confident.
The ISAE index of Italian consumer confidence for May is the data
highlight in Europe at 0730 GMT. U.S. Treasury Secretary O'Neill speaks
from 1330 GMT, Fed's Jordan from 1630 GMT and Fed's Greenspan from 0020
GMT.
--The CHF followed EUR/USD's swings. USD/CHF pulled back from a new
6-month high of 1.7920, while EUR/CHF bounced from a 5-week low of 1.5217.
--The GBP was less successful, with cable dropping to a 6-month low of
1.4128 but EUR/GBP only briefly slipped to a 5-month low of 0.6018. This
was despite the FT reporting that UK Chancellor Brown has expressed
concern about the policies and practices of the ECB. He reportedly said
this would be taken into account in any U.K. decision whether to join the
EUR, although his aides claimed this was not creating an extra hurdle for
EUR-entry. The CBI's quarterly industrial trends survey is due at 1000
GMT, while the U.K. auctions 2.5 billion GBP of new mediu-term Gilts
maturing March 2012.
--USD bloc currencies also generally responded to EUR/USD. AUD/USD and
NZD/USD bounced from 3 1/2 week lows of 0.5089 and 0.4149 respectively,
with the latter showing little reaction to the New Zealand budget.
USD/CAD, meantime, held below Tuesday's 8-day high of 1.5535 hit in New
York. BridgeNews
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