Friday November 27, 2009 - 03:32:23 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 27-Nov-2009 - 0330 GMT
The American equities were closed yesterday on account of Thanksgiving Day. The Dubai debt rescheduling attempts gripped the markets early today which saw the Asian indices bleeding nearly 2-3%. Dubai had borrowed $80 bln in a 4-yr construction boom to transform its economy to a regional tourism and financial hub and has suffered the worst ever property slump since World War II. It saw the prices spiralling down falling 50% from 2008 highs.
The Nikkei is trading 1.81% lower, the Hang Seng is trading 2.88% lower and the Shanghai 0.65% lower. The Shanghai had fallen over 3.5% yesterday and has broken below the trendline Support today and looks extremely bearish going forward. Malaysian, Singapore and Indonesian markets are shut today and have not been able to react. So were the American equities yesterday.
The Sensex (16854.93) may see some further fall towards 16500 today and meet an important Support there. It had corrected over 2% yesterday like most of the other Asian and European peers.
Crude (75.96) fell sharply yesterday following the sharp fall in the global stock markets after the goverment investment compay, Dubai world seeked delay in repaying much of its debt which has added further pressure on the concerns of the global economic recovery. If it continues to trade lower we might see a further dip towards 75-74 in the coming days.
Gold (1188.10) is continuing to trade higher. A break above 1200 might take it up further towards 1250 in the coming days. But, as mentioned earlier we might see some profit booking at 1200 (the psychological Resistance level) and can expect a pull back 1140-1120.
The Dubai debt-crisis (we are already calling it that) has caused major disruptions in the currency market as well. Dollar-Yen (85.93) crashed to a low of 84.82 today, the lowest since 1995. The earlier low was 87.15 in Dec-08/ Jan-09. The fall in Dollar-Yen has, obviously, dragged all the other currencies down with it. There is a palpable danger of large moves in the coming days. For instance, the market will now be tempted to gun for the 1995 low near 79.80.
The Euro (1.4944) has fallen from a high near 1.5145 yesterday. The Aussie (0.9041) has seen a low near 0.8990, seriously threatening to break its 10-month old uptrend. The Support to watch is 0.8906, a fall below which could be fatal. The Pound (1.6403) has come down from 1.6747 and could be bearish for 1.6165 as well. Dollar-Swiss (1.0092) has moved up from yesterday's low of 0.9913, and is now testing an immediate Resistance at 1.0128.
Asian currencies have also retreated. Dollar-Won (1167.60) has moved up from yesterday's low near 1149.80. It was anyway being supported by the Korean central bank yesterday. USD-SGD (1.3875) has also moved up a bit, but still trades below important Resistances at 1.3890-3900. Dollar-Rupee had closed at 46.44 after seeing a low near 46.13 yesterday. A rise towards 46.60-70 is quite possible today following the global markets. The NDFs have been quoted near 46.70.
3M USD LIBOR was lowered 1 bp further to 0.25%. The US T-yields fell sharply after Dubai debt concerns surfaced. The yields on 2Y and 10Y benchamrk notes fell 7 bps each to be quoted at 0.67% and 3.20% respectively. Not only the US, the yields world over have fallen sharply. The JGBs, the UK Gilts, the Euro Bunds have all risen thus bringing the yields lower on safety concerns.
...Actual 5.1%...Previous 5.3%
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