RTTN:Safe-haven Dollar And Yen Rise On Increasing Risk-aversion
(RTTNews) - The US dollar and the Japanese yen strengthened against their major opponents on Tuesday as worsening global economic outlook prompted traders to seek safe-haven currencies.
Both the yen and the dollar are viewed as safe haven currencies and they often rally when economic uncertainties persist and conversely lose ground when the risk-appetite become more robust.
Latest economic proceedings are in no way encouraging, with China's manufacturing activity easing to its weakest level in almost three years in October, the Reserve Bank of Australia cut interest rate for the first time in more than two and half years and doubts over European debt deals on China's reluctance to support the European Financial Stability Fund.
Survey results from the China Federation of Logistics and Purchasing indicated that the purchasing managers' index, or PMI, for the manufacturing sector fell unexpectedly to 50.4 in October from 51.2 in September, lending credence to calls for policy easing to support growth in Asia's largest economy.
Meanwhile, Australia's central bank reduced its benchmark interest rate by a quarter point as inflation eased and domestic growth moderated due to weak global economic activity. The country's borrowing cost, which was the highest in the developed world, was lowered for the first time since April 2009.
The benchmark cash rate was lowered by 25 basis points to 4.5 percent as expected, after keeping it unchanged for a year. The Reserve Bank of Australia, or RBA, has hiked the cash rate seven times from October 2009. The new rate will be effective from November 2.
Greek Prime Minister George Papandreou has threatened the euro zone with a new crisis with a surprise announcement that his debt-strapped country will hold a referendum on the new European debt deal reached last week. The referendum on a second bailout package for Greece could prompt snap elections if the majority of Greeks oppose the conditions set by the international lenders.
Extending previous session's rally, the US dollar advanced to a 12-day high against the euro and a 6-day high of 0.8838 against the Swiss franc in early European deals Tuesday. On the upside, the greenback may find target levels at 0.89 against the franc and 1.37 against the common currency.
Against the pound, the greenback reached as high as 1.6002 before holding steady around 3:30 am ET. The cable is presently worth 1.6025 with 1.5970 seen as the next likely target level.
The Japanese yen also advanced to 125.01 against the pound, 88.42 against the Swiss franc and 107.40 against the euro around 3:20 am ET. If the yen strengthens further, it may find resistance levels at 124.60 against the pound, 107.0 against the euro and 87.70 against the Swiss franc.
(RTTNews) - Residential property prices in the United Kingdom increased for a second consecutive month in October, results of a survey by Nationwide Building Society showed today.
The house price index rose a seasonally adjusted 0.4 percent on a monthly basis in October, following a 0.1 percent increase in September. Economists expected prices to remain unchanged.
On an annual basis, house prices increased 0.8 percent following a 0.3 percent drop during the preceding month. This was the first increase in prices since December last year. Economists had called for a 0.5 percent annual increase.
The yen also advanced against the resource-linked currencies in early Tuesday European deals, rising as much as 81.09 against the Australian dollar, 62.55 against the New Zealand dollar and 77.75 versus the New Zealand dollar before leveling off around 3:25 am ET. On the upside, the yen may find target levels at 76.10 against the loonie, 62.0 versus the kiwi and 80.80 against the aussie.
Against the US dollar, the yen erased some of early Asian session's losses and was mostly trading in a range between 78.70 and 78.0. The dollar-yen pair is presently worth 78.10 with 77.80 seen as the next likely target level.
Looking ahead, the U.K. preliminary third quarter GDP and the final PMI reports for October from the major European economies are due out shortly.
Turning to the North American session, the U.S. construction spending for September and ISM manufacturing index for October are due in the New York morning session.
