USD/JPY fell from 84.35 to 83.11

News and views 

Risk markets rose on relief that China did not raise interest rates in response to the weekend’s strong economic data. The S&P500 is currently up 0.5%, gapping to a fresh two year high of 1246. It was only briefly interrupted by Moody’s comment that the US tax package increased the likelihood of a negative outlook during the next two years, that news more hurtful to the US dollar. Commodities were buoyed by the lack of Chinese action, the CRB index up 1.2%, copper (+2.4%) notable for a fresh record high. The US 10yr treasury yield made a fresh six month high of 3.39% before reversing abruptly at 11am NY after the Fed bought $7.8bn of 7yr bonds from a lower volume market as well as bargain hunting.

The US dollar index started its decline after the NZ close, falling 1.5% with little interruption from 80.31 to 79.13. The pro-risk atmosphere, Moody’s comments, and lower US treasury yields all contributed, to the benefit of risky currencies. EUR did the reverse, rising from 1.3184 to 1.3434, amid a backdrop of Eurozone debt stability.USD/JPY fell from 84.35 to 83.11.

AUD rose from 0.9840 to 0.9985, a fresh one-month high.

NZD rose from 0.7475 to 0.7576. AUD/NZD was steady during the European and NY sessions around 1.3170.

No US data.

UK producer input prices rose 0.9% in November, led by oil, energy and across-the-board gains in imported goods. Annual growth of 9.0% is the fastest since Jan 2009.

Canada’s capacity utilisation rate rose to 78.1% in Q3, well ahead of forecasts and the highest in two years. The rise was led by machinery factories, up 8.7 percentage points to 85.4%.

Outlook

AUD/USD and NZD/USD outlook next 24 hours: Sentiment towards the US dollar has turned abruptly negative, providing a positive influence for the commodity currencies today. The recent surge in AUD leaves it slightly overbought intraday, but any pullback should be limited to 0.9900. NZD is bounded by 0.7480 and 0.7675. Today in NZ is the half-year Government budget, retail sales and house prices, these local events potentially bearish. Tonight’s Fonterra auction should be firm.

http://www.westpac.co.nz/