Currency Updates:
U.S. Dollar Trading (USD) rallied broadly across the board, aided by tighter lending conditions in China. The People&rsquo s Bank of China moved to raise the official cash rate by 25 basis points, the first time since December 2007. The unexpected rate hike by China was cause for lack of investor confidence, prompting a negative showing on Wall Street, simultaneously relieving dollar weakness. The Dow Jones ended the day down 165.0 points (-1.48%), the S& P down 25.90 points (-1.67%), whilst the NASDAQ also ended lower 43.7 points (-1.76%). In domestic news, housing starts rose by 0.3% for the month of September, whilst Building permits slumped 5.6%.
The Euro (EUR) slipped on Tuesday&rsquo s decision by the PBOC to increase interest rates. In similar fashion to US Share markets, the decision by China also saw a negative day in Euro share markets, down from six month highs. In local news, the German ZEW survey added to the Euro&rsquo s woes as sentiment fell for the sixth consecutive month to -7.2. As a result the Euro eased from highs of 1.4003 seen in early Asia, to trade with a low of 1.3721 before closing the day at 1.3728. German PPI scheduled for release on Wednesday.
The Japanese Yen (JPY) eased slightly against the dollar, in arguably the most subdued performing currency on Tuesday. Overall the USDJPY traded with a low of 81.15 a high of 81.92 before closing the day at 81.54
The Sterling (GBP) also slid versus the dollar post China, with sentiment remaining skewed on the down side in anticipation of UK Government spending review, and growing expectation of further quantitative easing by the BoE. The GBPUSD traded with a low of 1.5680 and high of 1.5940 before closing the day at 1.5699. Looking ahead, MPC minutes scheduled for release as well as the spending review.
The Australian Dollar (AUD) popped higher in Asia as RBA minutes of the October 5 meeting suggested that the decision to keep rates on hold at 4.5% (expectation to raise to 4.75%) was &ldquo finely balanced&rdquo . Markets interpreted the statement as further tightening could materialize as early as November. The AUD was unable to sustain rallies and coupled with the decision by the PBOC to increase interest rates overnight, the Aussie Dollar was one of the worst performing currencies on Tuesday. The AUDUSD traded with a low of 0.9663 a high of 0.9960 before closing the day at 0.9684.
Oil & Gold (XAU) XAU had a tumultuous time on Tuesday, falling in excess of 3.0% or US$41.40 to trade at US$1,330.70. Oil also eased on Tuesday, falling US$3.59 a barrel to trade at US$79.49 a barrel.
