Foreign Exchange

Tuesday, August 7, 2012 - 15:24

FXWRAP: Dlr Up Slightly In Quiet Trading, Yld Uptick Supports


NEW YORK, Aug 7 (MNI) - The dollar was able to rack up modest gains against the yen and tiny gains against the euro in a Tuesday session marked by modest flows and relatively narrow price swings, the greenback underpinned by a slight uptick in U.S. yields.

Dollar-yen was changing hands at Y78.65 Tuesday afternoon, the greenback in the upper reaches of the day's Y78.32-73 U.S. hours range after beginning the day at the low.

Euro-dollar meantime was changing hands at $1.2412, just above the $1.2405 low marked in afternoon trading, the euro back down from its session high notched at $1.2443 in morning trading.

Trading flows all session were muted again Tuesday, markets thinned by summer vacations in both Europe and the United States, and with little in the way of fresh news to drive flows.

A morning lift in dollar-yen, driven in part by firming yields in U.S. Treasuries, lifted dollar-yen to its high of the day, bringing the pair into contention with highs seen Friday after the U.S. employment report showed stronger than expected jobs growth.

But with technical resistance around Y78.80 reinforced by offers to sell dollars, the greenback was unable to make much progress as the early rally faltered around mid-morning.

Underpinning the greenback was a rise in U.S. yields where the yield on the benchmark 10-year Treasury rose to 1.623% from an early level at 1.595%.

Traders remind that dollar-yen remains sensitive to yield differentials, and with Japanese yields still locked near zero, the dollar tends to rise and fall as U.S. Treasury yields shift back and forth.

Further offers to sell dollar-yen are positioned at Y79.00 and higher and likely will slow dollar gains ahead, though traders suspect that the greenback is due for a rally against its Japanese counterpart.

Euro-dollar meantime was changing hands at the lower end of its session range, traders lacking any significant trading cues versus the pair and giving the greenback the benefit of the higher yield on U.S. Treasuries, pressing euro-dollar lower.

Early in the day, euro-dollar staged a brief lift to $1.2443 before turning lower, the pair capped by a thick layer of offers positioned ahead of $1.2450, according to traders.

With markets becalmed by summer vacations, a condition that also apparently keeps many European politicians away from the headlines, the single currency has been able to regain some poise as reminders about the European debt crisis and the fiscal woes of Greece are, for now, kept out of daily headlines.

That said, traders remain wary of pushing euro-dollar too high for fear that fresh pressures will emerge later in the month as traders and politicians return from their sojourns.

U.S. economic data released Tuesday came late in the session and had little impact on dealings.

June consumer credit rose $6.5 billion for the month, as revolving credit fell $3.7 billion but non-revolving credit was up $10.2 billion.

May consumer credit was slightly downwardly revised to a $16.7 billion increase.

Summaries:

EURO SUMMARY: Opened at $1.2421 after $1.2376-1.2432 overnight range.

-- Euro was pressing higher in early dealings as risk-appetites remained upbeat and euro was able to scratch out a marginal fresh high for the session at $1.2443 as fresh buying emerged around and just after the ECB fixing. With ample supply still in place ahead of $1.2450, euro turned lower as enthusiasm waned, and slippage extended quickly to $1.2410 on misquoted remarks from an EU official, steadying back around $1.2425 as market reassessed context of remarks. A brief look higher stalled again at $1.2440 and euro leaked slowly lower and amid light flows, dipping to $1.2415 by the London fixing and holding nearby into midday. Afternoon trading saw euro mired in a tight range around $1.2415 with a shallow dip seen to $1.2405, the pair ending around $1.2410.

YEN SUMMARY: Opened at Y78.36/97.35 after Y78.17-43 and Y96.84-97.49 overnight ranges.

-- A firmer tone of risk-appetite, coupled with firmer U.S. Treasury yields, underpinned the dollar pair in early going, allowing lift to Y78.50 shortly after the ECB fixing. Despite reported supply, model-driven demand kept both pairs underpinned and evaporation of exporter offers at Y78.60 around the option cut cleared a path for dollar gains to Y78.70 by the London fixing, euro-yen by now at Y97.80 and flirting with reported supply and the tech resistance positioned just beyond. Later trading saw the dollar end near Y78.63 as euro-yen provided some weight, slipping to Y97.56.

Dollar Rates in New York Trade:

Eur-Dlr Dlr-Yen Eur-Yen Stg-Dlr Dlr-Swiss 3:15 p.m. Tue 1.2407 78.64 97.59 1.5633 0.9683 1:19 p.m. 1.2418 78.72 97.75 1.5640 0.9676 11:22 a.m. 1.2421 78.68 97.73 1.5644 0.9672 9:21 a.m. 1.2434 78.56 97.70 1.5673 0.9664 7:29 a.m. Tue 1.2421 78.36 97.35 1.5656 0.9674 3:13 p.m. Mon 1.2401 78.23 97.03 1.5613 0.9685 7:29 a.m. Mon 1.2355 78.31 96.75 1.5555 0.9722 3:03 p.m. Fri 1.2378 78.58 97.26 1.5644 0.9708

End 2011 1.2962 76.98 99.70 1.5535 0.9376

--email: dennis@marketnews.com, Tel: (212) 669-6436

** MNI New York Bureau: 212-669-6430 **

[TOPICS: MNEF02,MTABLE]

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