Australian FOREX Daily Outlook 19/06/2007

Speculation of second RBNZ intervention in the space of one week. Japanese Yen crosses at multi year highs, EURJPY record high of 165.83. German ZEW survey to be released.

CURRENCY TRADING SUMMARY –19 JUNE 2007 (00:30GMT)

• U.S. Dollar Trading (USD) eased across the board affected by further drop in U.S. bond yields that undermined the appeal of dollar-denominated assets. The benchmark 10-year Treasury yield last stood at 5.17 percent, above an earlier low of 5.14 but off last week’s five-year peak of 5.33 percent. Further more, the USD continued to feel the repercussions of last weeks stagnate inflation data diminishing expectations of any rate hikes in 2007. In U.S. share markets the NASDAQ fell by 0.11 points (0.0%) whilst the Dow Jones also fell by 26.5 points (-0.19%). Following attacks on oil supplies in Nigeria, Oil reached a fresh 10 month high, as Crude jumped by US$1.09 to US$69.09 a barrel. Looking ahead, with very little economic data release scheduled, plenty of interest will surround today’s Housing starts for the month of May. Market expectations are that the figure will show a decline to 1.48 mio (Previous: 1.528 mio) well below the peak of the housing boom in 2005 where housing starts averaged 2.1 mio. The figure is expected to imply that the slump in the housing sector has not yet come to an end.

• The Euro (EUR) rallied above 1.34 levels once again as the USD suffered on the back of further drops in treasury notes. Overall the EURUSD traded with a range of a low 1.3376 and a high of 1.3419 before closing the day at 1.3413. Looking ahead key data will be released from the EZ in the form of the German ZEW survey. Analysts expect that the figure will be released at 87.5 for the month of June (Previous: 88)

• The Japanese Yen (JPY) continues to feel pressure on funding carry trades as the EURJPY cross reached an all time high of 165.83, and touched fresh 4.5 year highs against the USD, with markets adamant that the BoJ would tighten the fund rate. Overall the USDJPY traded with a range of a low 123.32 and a high of 123.76 before closing the day at 123.61 in the New York session.

• The Sterling (GBP) was the biggest mover on Monday, largely supported by the fact that the Sterling reached a 15 year high against the JPY, as investor appetite for risk retained interest in the higher-yielding currency. Overall the GBPUSD traded with a range of a low 1.9755 and a high of 1.9843 before closing the day at 1.9835 in the New York session. Focus now shifts on the BoE minutes released on Wednesday, although recent hawkish comments by Governor King may have nullified the impact of release, with markets now pricing in one rate hike by the Central Bank, and possibly a second by year end.

• The Australian Dollar (AUD) was range bound on Monday with the absence of data. Overall the AUDUSD traded with a range of a low 0.8399 and a high of 0.8453 before closing the day at 0.8434 in the New York session.

• The Kiwi Dollar (NZD) speculation that the Reserve Bank of New Zealand intervened on Monday to weaken the New Zealand dollar did little to sap the strength of the highest-yielder among G10 currencies. Though an RBNZ spokeswoman declined to comment, the kiwi briefly dipped to a session low of $0.7515 but quickly recovered.

• The Canadian Dollar (CAD) hit a two-week low against the U.S. dollar today as investor’s unwound recent positions, particularly against the Euro, Pound, and Yen.
  The Canadian dollar hit its highest level in at least 15 years against the Yen on Friday, and touched an 8-month high against the Euro. It also recently hit a 2007 high against the pound. Overall, the USDCAD traded with a range of a low 1.0653 and a high of 1.0752 before closing the day at 1.0725 in the New York session. Looking ahead, consumer prices, due on Tuesday. The Bank of Canada, which uses CPI to gauge inflation, has recently adopted a hawkish tone due to inflation that has stayed above expectations

• Gold (XAU) rose once more by US$1.30 an ounce to US$660.00 tracking higher oil prices.