Asian Session – US dollar broadly stronger as aussie, kiwi under fresh pressure

Posted on September 29, 2014 at 6:42 am GMT. Read More Blog

The US dollar was making fresh highs at the start of this week’s trading, as euro / dollar fell to fresh 22-month lows of 1.2662, while dollar / yen showed its readiness to test the 110 yen level as it traded at 109.73.  This was a 6-year high for dollar / yen.

The US dollar continued to benefit from strong economic statistics, such as Friday’s upwardly revised US 2nd quarter GDP numbers at 4.6%, which in turn have boosted expectations that the Federal Reserve will start to raise interest rates before other major central banks.

There was pressure on the New Zealand dollar, as it crashed below 78 cents to a 1-year low of 0.7706.  This followed the release of figures that showed that the Reserve Bank of New Zealand was a net seller of the country’s currency in August by the largest amount since 2007 – selling approximately half a billion New Zealand dollars (around 400 million US dollars).

Both the aussie and the kiwi have fallen sharply in recent weeks, losing the status they had gained by mid-year as the best performers among developed country currencies.

The Australian dollar also dropped, falling almost to its low of the year at 0.8685.  One possible reason for the aussie’s weakness was the pro-democracy protests in Hong Kong, which put some pressure on the local Hong Kong dollar and declines in stock markets in Hong Kong, China and Asia more broadly.  It remains to be seen whether the protests in Hong Kong will become a theme that markets will be considering more in coming days.

Looking ahead, personal spending and income data for August – together with the all-important Personal Consumption Expenditure price deflator out of the US will be looked at.  German preliminary inflation data for September during the late European session will precede tomorrow’s Eurozone flash inflation estimate in an important week for the euro as the ECB is also meeting later this week.