FXWRAP: Dlr Slips Slightly, Thin Conditions Exacerbate Swings
NEW YORK, Aug 10 (MNI) - The dollar was nursing mild losses against the euro and the yen Friday, the greenback a victim of profit-taking, or position unwinding, on a day marked by thin conditions and modest currency swings.
Euro-dollar was changing hands at $1.2292 Friday afternoon, the euro in the upper reaches of its $1.2241-1.2317 of its U.S. hours range after beginning the day at $1.2272.
Dollar-yen meantime was quietly trading at Y78.24, slightly below its early Y78.41 level and close to the middle of its Y78.17-46 U.S. hours range.
Afternoon trading had slowed to a trickle Friday after a morning session that was marked by a noticeable lack of liquidity and by correspondingly modest flows, some of which had outsized impact on a day when traders chose to keep risk positions to a minimum ahead of the weekend.
In afternoon trading, the euro had retreated modestly from its mid-morning high at $1.2317, achieved as a short-covering scramble lifted the euro quickly off its low of the day and through the overnight high, flushing layers of stop-loss euro buy orders.
After a morning slide that extended to $1.2241, the euro rebounded, cautiously at first, before accelerating through $1.2280 and $1.2310 as stop-loss buy orders were triggered, the euro briefly vaulting the overnight high at $1.2308.
After squeezing out the stop-loss orders, euro-dollar settled back to end not much changed from its early level.
While there were few new reminders of the ongoing eurozone debt crisis to upset the euro, traders remain mindful that the crisis has show few signs of abating, while recent economic data confirms that the eurozone economy is mired in a recession, dimming the prospects for the euro.
Dollar-yen meantime was trading in the lower half of its session range, the dollar here once again frustrating recent bulls as it skidded to a session low at Y78.16, flushing out longs that were set in recent sessions, including Thursday when the dollar rallied to near Y78.80 before stalling in the face of ample supply.
Friday, as the dollar wilted back below Y78.40, weak longs threw in the towel, traders mentioning real-money accounts and model-driven funds as dollar sellers in the move.
Elsewhere, the British pound also saw wide swings Friday, easing to an early low at $1.5578 as the pound extended a recent string of losses, only to rebound to $1.5702 as what appeared to be a large buy order, or a scramble to cover shorts, sent the pound surging.
Despite the strong rally in sterling Friday, traders at numerous active trading desks were unable to pinpoint the source of the demand, or the cause of the rally, suggesting that sparse liquidity may have allowed just modest-sized orders to drive the rally.
Late in the day, sterling was trading around $1.5672.
U.S. economic data released Friday;
July import prices printed dow 0.6% in a third sharp drop and a fourth consecutive decline. This was a far bigger drop than expected.
Import prices now are down 3.2% year-on-year, reflecting declining energy costs.
Even non-petrol import prices were down 0.3% and down 0.5% year-on-year in the largest 12 month dip since November 2009 (nonfuel was down 0.4%).
Export prices were up 0.5%, while non-farm exports fell 0.3%.
The July Treasury budget deficit narrowed to $69.6 billion compared with a $129.4 billion deficit in July 2011, and there was about an 11% or $93 billion improvement in FYTD 2012 (10 months in).
Since July 1 was a Sunday some outlays were pushed into June; July also had one more business day than last year so receipts were up $6 billion as a result.
EURO SUMMARY: Opened at $1.2272 after $1.2261-1.2308 overnight range.
-- Euro had been underpinned by Spanish and Korean demand off lows ahead of the U.S. session but remained defensive, seeing fresh pressure for an initial dip to $1.2255 that reversed to $1.2270 on light volumes. Renewed selling, led by euro-yen and other crosses, pressed euro to $1.22415 around the stock opening, flushing stops, the pair then rebounding slightly as bids at $1.2240 prevented a further stop run. Reversal accelerated through $1.2270 as intra-day shorts scrambled for cover and pair pushed through $1.2300 for $1.2317 as stops were crushed above the overnight high and as cable exhibited similar strength. Euro deflated to $1.2300 around the London fixing, easing to $1.2285 in thinning conditions and then steadying near $1.2290 for the balance of the session.
YEN SUMMARY: Opened at Y78.41/96.24 after Y78.41-64 and Y96.16-74 overnight ranges.
-- Euro-yen was under pressure ahead of the U.S. session, weighing on the dollar pair, and further selling weighed on both pairs as the U.S. session got underway. the dollar pressured by softer US yields for a dip through recent lows and on to Y78.16 as euro-yen skidded to Y95.72 as stops were flushed. Recovery in both was paced by the better tone of euro, euro-yen romping back to Y96.30 by the London fixing event but dollar-yen only able to regain Y78.27 before flopping back to lows around the fixing. Recovery from there saw Y78.25/Y96.20 by midday as light flows lightened further, both holding close by late in the day.
Dollar Rates in New York Trade:
Eur-Dlr Dlr-Yen Eur-Yen Stg-Dlr Dlr-Swiss 3:01 p.m. Fri 1.2291 78.24 96.20 1.5671 0.9767 1:29 p.m. 1.2293 78.23 96.18 1.5671 0.9767 11:49 a.m. 1.2298 78.24 96.25 1.5676 0.9675 7:07 a.m. Fri 1.2272 78.41 96.24 1.5606 0.9785 3:06 p.m. Thu 1.2291 78.59 96.60 1.5630 0.9769 7:39 a.m. Thu 1.2305 78.37 96.40 1.5635 0.9762 7:31 a.m. Wed 1.2360 78.33 96.80 1.5662 0.9719 7:29 a.m. Tue 1.2421 78.36 97.35 1.5656 0.9674 7:29 a.m. Mon 1.2355 78.31 96.75 1.5555 0.9722
End 2011 1.2962 76.98 99.70 1.5535 0.9376
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