Tuesday, August 2, 2011

Euro and GBP fell overnight, likely to stay weak

The Euro tumbled in Yesterday’s overnight session after the release of U.S. manufacturing data.
U.S. manufacturing expanded in July at the slowest pace in two years, indicating the industry that’s
been driving the economic expansion is starting to weaken.
The Institute for Supply Management’s factory index fell to 50.9 last month from 55.3 in June.
Market forecasted the index to drop till 54.5. This lead risk aversion and brought sell off
commodities and high yielding currencies.
The EURINR settled higher yesterday at 63.80, up 48 paisa and currently in Asia it is quoting at
63.30 levels. Further pressure in the Euro can be expected today on follow through selling pressure.
The cable was also pressurized by weakness in Euro along with weak manufacturing data from the
UK. The GBPINR August contract fell from a high of 72.85 and closed at 72.62, still up by 28 paisa
when compared to Friday’s closing. Today the GBPINR Aug contract is quoting at 72.40 levels at the
opening bell. The UK PMI for manufacturing dropped to 49.1 in July from a prior 51.3. The result
marks it´s worse in just over 2 years.
Pressure in high yielding currencies has pushed the USDINR higher today with the August expiry
future is currently trading up almost 15 paisa. The pair closed down 17 paisa yesterday at 44.2575.
All major Asian currencies declined, led by Malaysia’s ringgit and Singapore’s dollar on concern a
slowing U.S. economy will hurt the global recovery and damp demand for the region’s exports.
The Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, fell
0.1 % to 120.09 as of 10:16 a.m. in Hong Kong. The ringgit dropped 0.3 %to 2.9488 per dollar and
the Singapore dollar slipped 0.1 % to S$1.2016, according to data compiled by Bloomberg.
Today, we expected EURINR and GBPINR to trade weak while USDINR to trade higher.

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