9 November 2001, 17:48 MktNews: NY FX Eur-Dlr Sees Upwards Pressure After Record PPI Decline
The euro-dollar came under mild upward
pressure following a record decline in US Producer Price Index (PPI)
data.
U.S. October PPI fell 1.6% vs expectations of a decline of 0.4%,
bringing a new element to the FX mix, i.e., whispers of deflation.
The euro-dollar was trading at $0.8932 at 9:26 a.m. EST, up from
overnight lows seen near $0.8889.
John McCarthy, director of Foreign Exchange at ING Baring in New
York, said Friday's PPI report was "not what the economy needs right
now," stressing that it may be a one-off report and the data will have
to be watching in coming months.
"The dollar's been thrown everything imaginable over the last 12
months - terrorist attacks, falling equities ... and it still hasn't
really fallen," McCarthy said.
"A deflationary spiral could have a far more meaningful effect on
the dollar," McCarthy added.
The euro rose to highs near $0.8936 on the report before
stabilizing at lower levels, still well within the roughly 50 point
range seen overnight.
Traders see bids for the pair at $0.8880 a key technical support.
Stop-loss euro dollar sell orders should be seen on a break of that
support, with additional buyers found at $0.8850.
On the top side, the euro should be capped by offers around
$0.8940.
Dollar-yen was trading at Y120.35 at 9:27 a.m. EST, just under the
day's highs at Y120.53.
Overnight comments from Vice Minister of Finance for International
Affairs Haruhiko Kuroda that recent FX moves are unfavorable helped to
weaken the yen initially.
Later remarks by Bank of Japan Governor Masaru Hayami saying
currency moves should be left to the market prompted renewed yen buying.
Traders said offers in dollar-yen should be found near Y120.50,
with stops seen above Y120.60.
Additional offers should be found at Y121.00.
Bids for the pair are in place near Y120.00, with stops building on
a break below Y119.75.
Traders said that yen will likely hold the key to any breakout in
the euro.
Thursday's move down in the euro was triggered by euro-yen sales
once the pair broke through technical levels near Y108.20/25.
Euro-yen touched lows near Y106.90 before rebounding on Thursday.
Friday, euro-yen could not break below Y107.00 in overnight trade,
with many players eyeing the pair to see if downward momentum will
continue to build.
Traders said stop-loss euro-yen sell orders are building near
Y106.80.
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