Consoldiative Tone in FX, Equities Firmer

The US dollar is mixed today as it consolidates against the euro and Swiss franc, remains heavy against the yen and is performing best against sterling, especially following the unexpected marked deterioration of the trade balance. Euro buying against sterling and a healthy reception to the Irish bill auction helped the euro recover from the test on yesterday’s lows near $1.2660. Euro needs to surmount formidable resistance in the GBP0.8280-GBP0.8300 band to boost the near-term outlook. Strong Australian jobs data helped drive the Australian dollar to new highs since 5-month highs. The dollar has thus far been confined to yesterday’s range against the yen and has traded in a 25 tick range on either side of JPY83.75.

Global equity markets are firmer today. The MSCI Asia-Pacific Index rose 0.8%, its first increase in three sessions. Foreign demand for Philippine shares remains strong; already this month nearly 20% of the year-to-date foreign purchases of Philippine stocks have been recorded. With today’s 2.6% rise, the Philippine Stock Index is up almost 9.5% thus far in September. The Bank of Korea surprised many by keeping rates steady earlier today, but it was worth a modest 0.3% in the Kospi. Of note, the Shanghai Index fell 1.4%, its largest drop in a couple of weeks, led by financials and metals. There were reports suggest that Chinese regulators may be investigating recent trading in rubber. Meanwhile European bourses are 0.3%-0.7% near midday in London. Basic materials and technology shares are leading the way, but financials are also participating.