United Dollar extended losses against yen, with Lehman brothers shares thrusting concerns about ability of investment bank to raise funds in the midst anticipation of bigger losses.
Dollar was last recorded 0.8 percent down at 107.48 yen
Currency trader at Tempus Consulting in Washington, Greg Salvaggio, reports concerning Lehman dropped dollars and stocks down.
On Monday, Central bank of Chile announced that in spite of peso reversing a jagged appreciation, the bank would continue with the $8 billion foreign exchange intervention program, just as planned.
Central bank said that it would move on with the plan of buying dollars of worth 50 million, at daily auctions. The plan was initially foreseen in April after the launch of its intervention program, aimed at boosting and strengthening sap peso and reserves. However, with the rescue of mortgage lending giants Fannie Mae and Freddie Mac by United States boosting the American currency, Monday witnessed a peso closing at its weakest and lowest since august 2007.
For year-to-date, peso has fallen down to 5.5 percent and around 18 percent after the launch of intervention program in the month of April. The central bank plans is to purchase around $8 billion dollars by 12th of December.
After the Friday’s close of 524.00/524.50 per dollar, Monday witnessed peso CHILJ
In august, one of the board member of the bank confirmed purchase of $4.45 billion dollars in four months at a standard rate of around 488.72 pesos per dollar, as per the program.
With government of United States bailing out of mortgage lenders, Freddie Mac and Fannie Mae, supporting craving for risk in fiscal markets, Australian dollar strengthened up rising to 1.3 US cents. After closing at $US0.8175/79 on Friday, Australian Dollar was $US0.8306/11 at 1200 AEST. While local currencies were found dealing between $US0.8255 and $US0.8339, in the morning.
Jonathan Cavenagh, Westpac currency strategist, said that the boost in Australian dollar is a result of US government supporting risk as well as its rescuing of lenders Fannie Mae and Freddie Mac.
The mortgage companies will be now placed under conservator-ship by Federal Housing Financing Agency of United States. Under the conservator ship the stocks of the companies will continue to trade, in spite of the fact that the chief executives of the companies have been replaced.
Henry Paulson, US Treasury Secretary, said that the bailout of the lenders was aimed at calming down the fear of financial market from further damages from weakening mortgages as well as its effects on the economy of United States. He also added that the plan was best used as a mean or tool for supporting as well as shielding the markets and its taxpayers from total risk created by existing financial condition.
Jonathan said that the situation has belted down the risk aversion as well as has a much needed shot to the equities, which has pushed the Australian dollar. He called it all as a “dramatic turnaround”.
With broader All Ordinaries gaining 3.56 per cent to 5125.5 in the afternoon, Local equities rush forward and added 3.83 per cent to 5064.1, as it surged through the morning trade with standard S&P/ASX200.
Jonathan also mentioned that following the bailout of the two lenders position of US dollar was lowered down. He said that the whole rescue plan of the two mortgage lenders by government of united state is not at all healthy for the currency of United States over the average tenure.
Glenn Stevens, governor of Reserve Bank of Australia, after appearing in trial in Melbourne of the House of Representatives Standing Committee on Economics, made some remarks affecting the Australian currency. Jonathan believes that the impact was just a bit not to the extent of what’s happening currently in United States.
Jonathan said that he anticipated a riser in Australian dollar against the response of the weak currency of United States, in afternoon session.
With government of United States of America bailing out leading mortgage firms, Fannie Mae and Freddie Mac, Australian dollar opened over one US cent high. After a close of 0.8175/79 on Friday, the Australian currency was trading at$US0.8279/82 at 0700 AEST, while at 0747, the trading of Australian dollar rose to $US0.8332 8336.
The local currency was seen trading amid a high of $US0.8278 and a low of $US0.8028, over the offshore session of weekend. This is lowest the currency has been to since august 2007.
Danica Hampton, Bank of New Zealand currency strategist, said that over the weekend the market got more focused at the takeover of the mortgage lenders Fannie Mae and Freddie Mac, by government of United States. The mortgage companies own or guarantee almost half of the US mortgage bazaar.
Henry Paulson, US Treasury Secretary, said that rescue of mortgage firms is a move followed to protect financial market of united states from anymore damages, done by weakening and failing mortgages. In next few days US treasury is expected to purchase preferred stock of worth $US1 billion. Paulson added that the takeover plan of mortgage firm is best way to market ad taxpayers from total risk situation caused by existing fiscal condition.
Danica Hampton said that the markets are more or less focused at the mortgage firms, Fannie Mae and Freddie Mac, takeover by government of United States. She also said that US treasury has come up with four-part rescue program including an open-end assurance to offer enough capital necessary to avert falling out of agencies into receivership. She added that following a profit-taking on Japanese cross currency situation, morning witnessed a rebound by Australian dollar. Danica informed that the major situation of the day has been huge run high on dollar/yen as well as a huge purchase of euro/yen and Aussie/yen, due to which the Australian currency was underpinned in the morning.
Hampton said that due to the fear and apprehensions about global economy market is busy selling Australian dollar (high yielding currency) to yen (safe-have currency), last week. Following the global growth fears, last week market got extremely short cross yen. According to Danica, in these conditions support of this level to strengthen financial sector of United States is sufficient to cause a ricochet in risk appetite. She called it an excuse for taking revenues in market and hoped for a continuance in existing market volatility.
On Friday National Stock Exchange or NSE launched highly anticipated currency futures. NSE based in Mumbai presents the derivatives, as finance minister P. Chidambaram kicked off primary exchange-traded currency futures of the country. National Stock Exchange is also the first platform for currency futures, chose by authorities.
The same is to be soon followed by India’s other exchange organization like Bombay Stock Exchange and Multi Commodity Exchange. These exchange offices are expected to receive consent from regulatory authorities. The day witnessed huge trading by banks, big companies as well as Forex dealers. The front-month deals witnessed heavy trading and utmost activity.
Around 1:15 in the afternoon, NSE also witnessed trade of over 28,942 contracts and the heaviest trade being the contracts of September and October.
While on Thursday rupee closed at 43.78/79, Friday saw rupee being traded at 43.78/79 per dollar, lowest at 43.8325 and highest at 43.69. The contracts traded are of size of US$1,000, which is smaller than 100,000 Australian dollar and 12.5mn Japanese yen (Chicago Mercantile Exchange’s contract sizes)
P. Chidambaram, Finance minister, felt the need of use of more refined financial tools by government. He said that launch of currency futures is followed by the need of reinforcement of corporate bond markets and rejuvenation of exchange-traded interest rate derivatives bazaar. He also added that government is following the above requirements with priority.
The launch of currency features is expected to assist investors finding it difficult to cope with untamed and abrupt rise and fall in the Indian currency. In a time frame of last one month, rupee has traded 17 month low and decade high.
Chief Executive Officer NSE, Ravi Narain, said that in economic market there has been a realization of exchange rate equally affecting individual’s financial life, just as interest rate. He also added that in spite of the start being a slow one there is probability of the amount to touch US$35bn.
Purpose of currency futures is to allow investors put of foreign exchange risk experienced by them. For now, dealing in all derivatives is limited to pair of dollar-rupee only.
With investors squaring USD positions before three day extended weekend in US, Australian dollar backpedaled and closed at $US0.8600. Audtralian dollar was being traded at $US0.8609/11 at 1700 AEST, which was down from last day’s closing volume of $US0.8674/78. the day also witnessed a movement of local currency amid a low of $US0.8605 and high to $US0.8660.
Positining its way up through fridday’s session,in mid-afternoon australian dollar reached an intrady high of $US0.8660 being dealt in a situation with serene USD weakness. The last 90 minutes saw fall of the Australian currency, as investors in United States were getting ready for the long weekend with a public holiday of Labour Day on Monday and another round of US data.
Jonathan Cavenagh, Westpac currency strategist, said that the overnight fall or come back of Australian dollar comes after a series of ups in last few domestic sessions. He also said that another reason could be avoiding of volatility by many investors due to the surprising data of the week.
Friday night’s US data consists of personal income as well as spending statistics for the month of June; the data also includes Chicago PMI for the month of August.
On Tuesday a meeting is expected between Reserve Bank of Australia (RBA) and Australian Bureau of Statistics. The agenda of meeting is to publish gross domestic product (GDP) of June quarter. With expectation from RBA on sitting down of cash rate by 25 basis points, Jonathan also said that market is looking for hints on how worried central bank about growth and expansion prospects of Australia. The cash rate is currently 12 year high of 7.25 percent. Jonathan added that market will focus more concern of Reserve Bank of Australia about further growth and possibilities of more cuts. Following a decision made by Reserve Bank of Australia board on Tuesday, it was anticipated that Australian dollar would trade somewhere between $US0.8500 and $US0.8700.
Behind of Thursday’s close of 67.9, the Reserve Bank of Australia’s trading weighted index was observed at 67.7 at 1600 AEST.