Daily market report Dollar Set for Weekly Drop as Shutdown Clouds Taper - Germany’s Merkel Is Key to Currency-Trading Levy - British Pound Starting to Ease Back Before BoE The dollar headed for a third weekly decline against the yen as the U.S. government shutdown delayed a key jobs report, clouding the outlook for when the Federal Reserve will taper stimulus. The greenback traded near an eight-month low versus the euro after Atlanta Fed President Dennis Lockhart said the shortage of data “would tend to make me somewhat more cautious” about reducing the pace of bond purchases. U.S. lawmakers still need to agree on raising the debt limit to avoid a default after Oct. 17. The yen strengthened briefly after the Bank of Japan refrained from adding to monetary easing. The dollar fell 0.2 percent to 97.11 yen as of 6:40 a.m. in London. It traded at $1.3626 per euro from $1.3619 yesterday, when it reached $1.3646, the weakest level since Feb. 4. For the week, the dollar has dropped 1.2 percent versus the yen and 0.8 percent against Europe’s shared currency. The first partial government shutdown in 17 years has delayed three economic releases this week, including the monthly payrolls report and the official jobless rate, which had been scheduled for release today. German Chancellor Angela Merkel’s choice of coalition partner will play a key role in deciding how far the foreign-exchange market is burdened by a proposed financial-transactions tax in 11 European Union states. Merkel, who last year backed a European Commission plan for a broad-based tax on trades in stocks, bonds, derivatives and other assets, is due to start talks on forming a government with the opposition Social Democrats today. The SPD has pledged to make the delayed levy a high priority if a coalition with Merkel’s Christian Democratic bloc emerges. Currency traders are seeking an exemption from the tax, saying it would reduce liquidity and push up costs for companies and pension funds. The tax may increase some trading costs by as much as 4,700 percent, according to the London-based currency unit of the Global Financial Markets Association, which represents 22 firms responsible for 90 percent of the turnover in the $5.3 trillion-a-day foreign-exchange market. The sterling has seen moderate but concerning corrections across the FX market this past session. In fact, the GBP/USD’s decline Thursday may only have been 0.4 percent, but it is largest slump for the pair in two weeks. Through the session, the currency lost ground against all the majors with the exception of the kiwi. This mild bauble doesn’t fully reflect the precarious position the pound finds itself in. Interest rate expectations have run far beyond policy vows and, few would argue, excessive. Any risk aversion would find an exposed victim here. Have a good day!
Posted on: Fri, 04 Oct 2013 09:17:14 +0000
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