Singapore dollar fell late

The Singapore dollar extended its slide against the U.S. dollar Tuesday, as resurgent worries over the expanding euro-zone debt crisis roiled global markets.
The U.S. dollar was quoted at S$1.2300 late in the Asian session, after reaching an intraday high at S$1.2318.
Risk sentiment, already weakened by fears over Spanish and Italian sovereign debt, was further dampened by comments from newly elected International Monetary Fund Managing Director Christine Lagarde that the IMF wasn't yet at the stage of discussing conditions for a second bailout package for Greece.
Analysts say the spike in risk aversion has added to the already downbeat sentiment toward the Singapore currency, following dull economic data from the U.S. and China over the weekend.
"The Singapore dollar looks to be rangebound this week, with a weakening bias," Chow Penn Nee, an economist at UOB, said. "Concerns over the euro zone are weighing, while on the domestic side, we have advance GDP (gross domestic product) figures due on Thursday that are expected to show a slowdown in the second quarter."
She pegged resistance for the U.S. dollar at S$1.2350, with support at S$1.2200.
Singapore government bonds extended Monday's gains, especially on longer-dated paper, as investors fled risk assets.

Won Tuesday's closing down

The South Korean won was lower against the U.S. dollar late Tuesday as fresh concerns over the euro-zone debt crisis turned investors away from risk-sensitive assets including the local currency.
The dollar opened stronger amid fears that the European sovereign debt woes could spread to Italy and Spain, and strong buying by offshore players lifted it up to KRW1,068.30 in early trade. But consistent dollar selling by exporters, combined with demand for the local currency related to purchases of local bonds by foreign investors, stemmed the greenback's rise. The dollar traded in a narrow range between KRW1,064.50 and KRW1,068.30 for the session.
Participants said the risk-off mood will likely continue for the rest of the week, as uncertainties remain over the stress-test results of European banks due Friday.
"The dollar is quickly regaining its strength against the euro and other risk-sensitive currencies. If the euro fails to be supported at $1.3900, it will likely spur selloffs in the won as well," said Byeon Ji-young, a foreign-exchange market analyst at Woori Futures.
She pegged the dollar's initial resistance at KRW1,070.
Korea government bonds and bond futures jumped, tracking gains in U.S. Treasury prices Monday on the renewed euro-zone debt worries, while the local stock market's sharp 2.2% loss provided additional support to the safe-haven bond market, participants said.
"Some investors also seem to have bought bonds for short covering, as the Bank of Korea is widely expected to keep the benchmark interest rate on hold at its July policy meeting," said Park Hyung-min, a fixed-income analyst at Tong Yang Securities.
Twelve out of 14 economists and analysts expect the Bank of Korea to keep its key rate at 3.25% in a Dow Jones poll. The BOK's rate decision is due Thursday.
"Though uncertainties over the euro-zone debt issues could weigh on bond yields, they now appear to have limited downside after today's sharp fall," Park said.
He tipped near-term support for the three-year yield at 3.70%.
September bond futures ended 36 ticks higher at 103.33.
Foreigners were net buyers of bond futures for a second day with a record-high net purchase of 22,214 contracts, surpassing the previous peak of 17,540 contracts set on Feb. 15, 2007.

Australian shares fell on Tuesday

Australian shares fell on Tuesday The Australian share market Tuesday suffered its biggest one-day fall in three weeks, with financials and consumer discretionary stocks leading broad-based declines as the European sovereign debt crisis spread to Spain and Italy. Traders said a euro group statement failed to halt speculation that Greece could default and that Italy and Spain would come under further selling pressure. "The biggest concern now is Italy and whether it is at a point where it needs assistance. The fear is that Italy may be too big to bail out. I think that's going to continue spooking markets in the short term," said Justin Gallagher, RBS head of domestic sales and execution in Sydney. The benchmark S&P/ASX 200 closed down 1.9% at 4501.8 after hitting a nine-day low of 4491.7, on heavy volume. The index was approaching the June trough at 4451.7, having fallen 3.4% so far this week. Overnight, Wall Street's S&P 500 fell 1.8% amid steep declines in European equity markets as bond yields of peripheral euro-zone countries soared. In Asian trading, the Shanghai Composite fell 1.5%, Hong Kong fell down 2.1% and S&P 500 futures fell 0.7%. Gallagher of RBS in Sydney said equities were still struggling after Friday's weak U.S. jobs data. He expects markets to stay nervous before China's GDP and U.S. retail sales data Wednesday, as well as the results of European bank stress tests, due later this week. "Price action in every asset class tells me the Australian share market is likely to break the June low of 4451.7," said IG Markets institutional dealer Chris Weston. "The overriding factor here is contagion from Greece, which is spreading to Spain and Italy. We are not getting any clarity from European officials on potential bailouts, so people are taking risk off the table." Risk aversion was most evident in the financial sector, where Macquarie Group fell 6.0% to A$28.22 and National Australia Bank fell 3.7% to A$23.88. Citi reiterated its Sell rating and A$30.50 price target on Macquarie, citing data showing that Macquarie's involvement in equity capital markets and merger-and-acquisition deals has fallen sharply in this financial year. News Corp., which owns Dow Jones Newswires, fell 4.6% to A$15.19 after its U.S.-listed shares fell 7.1% on the U.K. phone tapping scandal. Macqurie cut News Corp. to Underperform and a group of shareholders, led by Amalgamated Bank, along with several municipal and union pension funds, filed claims in a U.S. court, accusing News Corp. of corporate governance failures. Virgin Blue fell 8.8% to A$0.31 and Qantas fell 4.9% to A$1.84 amid further selling after the Federal Government's carbon tax plans announced Sunday, which will see both airlines hit with an additional tax burden when the scheme is introduced. Resources also suffered from global risk aversion, with BHP down 1.9%, Rio Tinto down 2.1% and Iluka down 5.8%. Macarthur Coal rose 37% to A$15.14 after Peabody and Arcelor Mittal launched an indicative cash bid, pitched at A$15.50 a share, less any final dividend. The Australian coal sector piggybacked off the Macarthur bid, with Gloucester Coal, Whitehaven and New Hope rising. "Renewed takeover interest in Macarthur is certainly helping support the coal sector," BBY senior institutional trader Peter Copeland said. "The value that corporates are prepared to put on companies in the resources space is clearly higher than that of investors in the secondary market."

Australian dollar fell in Asian trading on Tuesday

Australian dollar fell in Asian trading on Tuesday

The Australian dollar pushed sharply lower Tuesday as renewed fears Europe's debt crisis could spread to Italy and Spain heightened risk aversion.
Australian bonds were helped by the concerns, with bonds at both ends of the curve rallying.
New International Monetary Fund chief Christine Lagarde said it's too early to discuss "the conditions and terms and lengths and volume" of a second Greek bailout, setting off the decline in risk-sensitive assets, such as the Australian currency and equities across Asia. Her comments come on the heels of a euro-zone finance ministers' statement that said they are considering boosting the scope of a financial stability fund, while taking a tougher line on Greece's private creditors.
At 0615 GMT, the Australian dollar was at US$1.0600, down from US$1.0717 late Monday. Against the Japanese yen, the Australian dollar was at Y84.72, down from Y86.55.
Richard Grace, chief currency strategist at Commonwealth Bank of Australia, warned Tuesday's slide could be a harbinger of more to come.

"This is not an environment where the Aussie goes up. You've got a U.S. dollar bid in the market, commodities declining, and equity markets declining as risks cloud markets," said Grace, who tipped support at US$1.0515 and then US$1.0400.
Still, he said there was some solace in the fact that the Aussie was up against the euro and New Zealand dollar, and flat against the British pound.
Market participants will next be watching the release Wednesday of China's gross domestic product, industrial production, retail sales and fixed asset investment.
Citing the troubling news on offshore economies, and a drop in business confidence in National Australia Bank's monthly business survey released Tuesday, JPMorgan Chief Economist Stephen Walters revised the firm's forecast for the next interest rate hike from Australia's central bank to November from August.
A similar feeling was evident in the swaps market, with traders now pricing in a 40% chance of a rate cut come August.
"There has been enough bad news released in recent days -- sagging business confidence today, a lousy U.S. payrolls result Friday, and an escalation and broadening of the sovereign crisis in Europe -- to suggest that (Reserve Bank of Australia) officials are likely to extend their policy pause for a few more months," said Walters.
Still, Walters said the central bank will raise rates soon enough, forecasting 75 basis points of tightening between now and the end of 2012.

Australian government bonds rose Tuesday

Australian government bonds rose Tuesday The Australian dollar pushed sharply lower Tuesday as renewed fears Europe's debt crisis could spread to Italy and Spain heightened risk aversion. Australian bonds were helped by the concerns, with bonds at both ends of the curve rallying. New International Monetary Fund chief Christine Lagarde said it's too early to discuss "the conditions and terms and lengths and volume" of a second Greek bailout, setting off the decline in risk-sensitive assets, such as the Australian currency and equities across Asia. Her comments come on the heels of a euro-zone finance ministers' statement that said they are considering boosting the scope of a financial stability fund, while taking a tougher line on Greece's private creditors. At 0615 GMT, the Australian dollar was at US$1.0600, down from US$1.0717 late Monday. Against the Japanese yen, the Australian dollar was at Y84.72, down from Y86.55. Richard Grace, chief currency strategist at Commonwealth Bank of Australia, warned Tuesday's slide could be a harbinger of more to come. "This is not an environment where the Aussie goes up. You've got a U.S. dollar bid in the market, commodities declining, and equity markets declining as risks cloud markets," said Grace, who tipped support at US$1.0515 and then US$1.0400. Still, he said there was some solace in the fact that the Aussie was up against the euro and New Zealand dollar, and flat against the British pound. Market participants will next be watching the release Wednesday of China's gross domestic product, industrial production, retail sales and fixed asset investment. Citing the troubling news on offshore economies, and a drop in business confidence in National Australia Bank's monthly business survey released Tuesday, JPMorgan Chief Economist Stephen Walters revised the firm's forecast for the next interest rate hike from Australia's central bank to November from August. A similar feeling was evident in the swaps market, with traders now pricing in a 40% chance of a rate cut come August. "There has been enough bad news released in recent days -- sagging business confidence today, a lousy U.S. payrolls result Friday, and an escalation and broadening of the sovereign crisis in Europe -- to suggest that (Reserve Bank of Australia) officials are likely to extend their policy pause for a few more months," said Walters. Still, Walters said the central bank will raise rates soon enough, forecasting 75 basis points of tightening between now and the end of 2012.

AUD/USD analysis 12 July 2011

AUD/USD analysis 12 July 2011

Undermined by stronger investor risk aversion, Australian government's carbon tax proposal, worries over China's economic slowdown as Beijing continues to tighten policy to combat inflation; softer commodity prices (CRB spot index closed down 2.93 yesterday at 340.62); Aussie sales on soft AUD/NZD cross. But AUD/USD losses tempered by AUD-USD interest rate differential, sovereign demand for Aussie. Data focus: 0130 GMT Australia June NAB business survey. Daily chart mixed as MACD bullish, but stochastics have turned bearish at overbought. Support at 1.0627 (yesterday's low); breach would expose downside to 1.0515 (June 29 low), then 1.0494 (100-day moving average) and 1.0431 (June 28 low). Resistance at 1.0723 (hourly chart), then at 1.0755 (yesterday's high) and 1.0788-1.0790 (Friday's high-July 1 reaction high); breach expose upside to 1.0888 (May 11 reaction high), then 1.1011 (29-year high set May 2).