Finotec News Archive - March 24 2008

Has the green back changed direction up?

Rodian Rahnayev
24 March 2008

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The dollar edged up broadly on the last trading day in previous week. Investors took profits from oil, gold and other commodity positions, turning their cash into the U.S. currency ahead of the Easter break. U.S Existing Home Sales data released above the expectations and supported the green back.

However analysts said it was too early to call an end to the rout which has taken the dollar to record lows versus the euro, the Swiss franc and a basket of major currencies this week as well as 13-year troughs against the yen. The euro was down against the green back on Monday and also gained more than 1 percent via yen, and rose back above parity versus the Swiss franc.

But with interest rates of just 2.25 percent the second lowest among major economies -- and set to fall further, the U.S. currency remained under pressure versus the high-yielding Australian and New Zealand dollars.

Markets are pricing in an around 80 percent chance of a 50 basis point cut at the Federal Reserve's April meeting, adding to 200 basis points of easing administered so far this year.

"The Fed has left the door open for further rate cuts, despite their increased level of concern about inflation. The fall in U.S. real yields remains negative for the dollar," CBA said in a research note.

However it added the next bout of dollar weakness may not come until after March non-farm payrolls on April 4 and the meeting of the Group of Seven major economies on April 11-12. Worries about the health of the banking sector also remained on investors' radar after Credit Suisse said it believed it might not have been profitable in the first quarter of 2008, announced valuation reductions for the last quarter of 2007 and said it would restructure some trading operations.

The week's news is fairly light. US housing data are probably the most significant information Wednesday but GDP in NZD and a round of econ reports for the GBP on Friday may have some impact on the market. If anything it may make the unexpected news all that more important.

Finotec Analysis Team
24 March 2008

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Today's Economic Events

Time	Event	Currency	Period	Previous	Forecast	Significance	Actual
14:00	Existing Home Sales	USD		4.89	4.85		5.03
Measures the annualized number of existing residential buildings that were sold during the previous month.