Dollar down on speculation over US data

The dollar was down against the Euro and Yen Wednesday on Speculation that the Fed will refrain from a rate hike in the short term.

Dollar down on speculation over US data


The dollar was down against the Euro and Yen Wednesday on Speculation that the Fed will refrain from a rate hike in the short term. With US durable goods orders out today at 12:30 GMT, analysts are predicting a decline in orders due to reduced consumption. The expectation is that bookings for goods in the US were unchanged in July. If the data comes out below expectations we could well see downward pressure on the greenback. ``The dollar still faces some risks of further declines,'' said the chief analyst for global market sales and trading in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd ‘The dollar declined to $1.4685 per euro at 8:14 a.m. in London from $1.4653 in New York yesterday, when it hit $1.4571, the strongest since Feb. 14.

Meanwhile the Wall street journal is predicting likely decline of the Euro and Sterling against the dollar as economies outside the US continue to be hit by the credit crunch. The Bank of America expects a rate cut to 3.5% in the UK by the end of 2008. Sterling hit a 12 year low on Wednesday against a basket of currencies on pessimistic sentiment about the UK economy. There is growing feeling that the struggling Euro Zone will impact Britain negatively. At 10am GMT GBP/USD was trading at 1.8458

Meanwhile the Australian and New Zealand Dollars were both lifted from weak levels as investors began buying higher yielding currencies. A recovery in the US and Asian stock markets has encouraged the purchasing of shares and currencies carrying higher interest rates such as the ‘Aussie’ and the ‘Kiwi.’ Although so called carry trade currencies tend to show higher volatility, there is more appetite for risk as world stock markets improve.


Crude gains as Gustav threatens

Crude was up again on Wednesday to around $117 as Tropical Storm Gustav threatened supply in the Gulf of Mexico. Although downgraded to a Tropical Storm, it could regain Hurricane status. Gustav might well become the first storm since 2005 to attack production of oil and gas on the gulf. “I’m afraid (Gustav) could potentially cause an impact similar to Hurricanes Katrina and Rita, although I certainly do not wish such things,” said a fund manager in Tokyo. Eyes will also be on Crude and Gasoline inventories out on Wednesday. There are expectations of mixed data with predictions of a 1 million barrel increase of crude but a 2.9 million barrel fall in gasoline.


Gold higher as Dollar falls
Gold was pushed higher on Wednesday as the dollar fell from recent highs against the Euro. Gold is seen as an alternative to the falling dollar and a hedge against inflation. Speculative buying was fuelled over continuing Tensions between Russian and the West. Meanwhile India’s marriage season is underway, stoking increased demand for the precious metal. India is the world’s biggest Gold consumer and demand is likely to stay high over the next few weeks.