Asian Market Update

Daily Forex Fundamentals | Written by Trade The News | Jul 24 08 04:16 GMT |

Asian stocks continue winning streak, NZD/USD plummets Forex: The high-yielding Aussie and Kiwi currencies both came under pressure in Asia, with AUD/USD testing stops below $0.9590 and NZD/USD trading near six month lows after the RBNZ cut interest rates by 25bps. EUR/USD also looked heavy throughout the session, with European Commissioner Almunia telling the press that he is concerned about the EUR being overvalued. GBP/USD spent most of the session in a 15pip range, with the U.K. Telegraph running a story referencing a report 'from a key Treasury advisor' saying that the neutral level of rates is now below 5% in the U.K. The report therefore argues that the BoE will leave rates on hold for longer than previously expected, but the market has so far shown little reaction. Tokyo Marine is rumored to be making a $4.4B bid for Philadelphia Consolidates, supporting USD/JPY. But option related selling is seen ahead of 108.00, and is expected to limit the pairs upside over the coming hours. In the medium term, USD/JPY looks firm, and the immediate target for USD/JPY is 108.50 (a break above could target 110, according to chartists) The Reserve Bank of New Zealand cut interest rates by 25bps to 8.00%, sending the NZD/USD to a six month low. The NZD is on a slippery slope, with several market observers calling for a September rate cut. 'Economic activity is likely to remain weak over the remainder of 2008,' said RBNZ governor Bollard. 'Provided that the outlook for inflation continues to improve and there is no excessive exchange-rate depreciation, we would expect to lower rates further,' he said. The Bank of Japan's Mizuno, considered to be the most hawkish member at the central bank's board, said that interest rates should be kept on hold for now. 'There is a positive aspect to deciding at policy-setting meetings to stand pat for the time being, in order to achieve a goal of monetary policy: that is, to contribute to sustainable growth through price stability,' he said. 'The fog that covers the nation's economy is unlikely to dissipate for a while,' Mizuno said. An unexpected drop in exports shrinks Japan's trade surplus: (JP JUNE MERCHANDISE TRADE BALANCE: ¥138.6B V ¥500B expected, ¥362.2B prior; ADJUSTED: ¥135.4B V ¥342.7B expected, 642.3B prior) Japanese exports to the U.S. declined -15.4% y/y in June, while exports to the E.U. declined -11.2% y/y. Overall exports declined by -1.7% y/y, worse than market estimates at +3.8% y/y. Driven by rising oil and raw material prices, imports rose by a lofty 16.2% y/y, in line with market expectation. Analysts said the weak trade data would not change the Bank of Japan's assessment of the economy and monetary policy as it has sharply cut its growth forecast recently. Equities: At 23:58 EDT Japan's Nikkei is +1.05%, the S&P/ASX200 is +0.56%, South Korea's KOSPI is +1.81%, Hong Kong's Hang Seng index +0.29%, and the Shanghai composite index is +0.77%. The S&P500 futures contract lost -0.11% since the U.S. close, last trading at 1,281.00. The Nikkei continues its winning streak, with a rising USD/JPY and falling oil prices boosting sentiment. Similar to yesterday's session, banks and exporters led the rally, but the benchmark index remains capped by 13,500. In Australia, the S&P/ASX200 failed to move above 5,150, with declining resource companies offsetting gains among financials and retailers. Tech companies, automakers and certain steel companies supported South Korea's KOSPI index, while airlines, banks and oil refiners provided upside in Shanghai. The Hang Seng index failed to make progress, with some investors taking profits after the recent gains. Commodities: Nymex crude oil lost -0.13% between 18:00 EDT and 23:53 EDT, last trading at $124.28/bbl. Crude prices fell sharply during the U.S. session, as the market continues to remove the premium associated with Dolly. Inventories data was mixed as crude stocks were lower than expected, while gasoline inventories were higher than expected. The Wall Street Journal speculates that the collapse this week of SemGroup LP, a little known private oil-marketing firm, may have played a role in crude oil's 14% drop over the past 10 days. Changes in its hedging strategies coincided with big moves in oil recently, the WSJ points out. One theory making the rounds in the market is that as SemGroup's long positions snowballed, so did the oil rally. Spot gold managed to erase losses in the early Asian morning, and is currently trading near levels seen at the New York close. Trade The News Staff Trade The News, Inc. 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