IN OVERNIGHT trading, the US dollar gave back a small portion of the strong gains it had chalked up over the past month, rattled a bit by the combination of a stronger - than - expected number out of the Eurozone, and the weaker US housing numbers released on Tuesday evening.
Combined with persistent reminders about the fragile state of US financial-sector health, these punished Wall Street and helped gold to rebound smartly through US$800 per ounce, and oil prices to recover in excess of US$2 per barrel.
Given that some of the week’s more important data releases were crammed into Tuesday trading, players suggested that this might have provided some added incentive for a little profit-taking on overbought US dollar positions in overnight trading - especially when the breaking news worked against the latter’s favour.
Out of the Eurozone, for example, a closely watched August ZEW index of economic expectations for Germany showed a chunky improvement to -55.5, compared with July’s -63.9 reading and forecasts for a softer outcome of between -60 and -64.
Out of the US, by stark contrast, the numbers for July housing starts and building permit readings both showed good-sized slippage from their respective June readings, fuelling concerns about more large US financial-sector provisions down the road.
At least partly in response to that, gold finished the day almost 2 per cent stronger higher from Tuesday’s Asian close at US$809 per ounce. Notable victims of the US dollar’s recent resurgence such as the euro, Australian dollar and New Zealand dollar rode gold’s bounce to finish up to 0.3 per cent better - at US$1.4713, 86.90 US cents and 71.08 US cents respectively.
Sentiment, however, continued to be rough on the Indian sub-continent, with Nymex light crude revisiting the US$115 per barrel mark yesterday. Despite the mild slippage recorded elsewhere, the greenback was able to score a fresh 17-month high of 43.86 rupees yesterday.
Indeed, players report that it might have risen even more sharply if not for widespread talk of possible intervention sales by the agent banks of the Reserve Bank of India. JP Morgan researchers, for example, project that the US dollar will end 2008 back up towards the 45-rupee level. ‘The rupee weakened at a brisk pace in the past week owing to broad-based US dollar strength, elevated purchases from oil marketing companies and renewed withdrawal of funds from foreign investors,’ they explained yesterday.
By the Asian close, the US dollar had recorded gains of up to half a per cent each versus the rupee as well as another notoriously oil price-sensitive currency, the Philippine peso, at 43.77 rupees and 45.68 pesos respectively.
Elsewhere in the region, the greenback also closed 0.2 per cent better at 110.2 Japanese yen, but slipped between 0.2 and 0.3 per cent to finish at 9,160 Indonesian rupiah, 3.3345 Malaysian ringgit and 6.8552 Chinese yuan. At the same time, it ended about unchanged at S$1.4160, 1,049 Korean won and NT$31.39.
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