THE US dollar was punished once again by more bad news for the US economy overnight, while in contrast the Chinese yuan clocked fresh highs after yet more strong numbers for the Chinese economy. By the Asian close, the greenback had tumbled to fresh post-depeg lows of 7.4820 Chinese yuan and 3.3560 Malaysian ringgit, and established a fresh 10-year low of S$1.4565 as well.
For Singapore dollar-based readers, it is important to make the additional point that the local unit has been able to hold its own versus both the strengthening yuan and ringgit over the past couple of months.
In terms of this year’s highs and lows, the two have traded in a 2007 range of S$0.1944 to S$0.2026 and 43.15 to 45.28 Singapore cents, respectively. Yesterday, the yuan and ringgit finished towards the lower end of those ranges – at S$0.1947 and 43.4 Singapore cents respectively.
On the US side, however, some traders suggested that it may well have taken the rumour of an emergency discount rate cut to help Wall Street recover from a sharp slide in early Wednesday trading – following more bad news from both the US housing sector as well as yet more fallout from the US sub-prime mortgage loan front.
In contrast, news yesterday morning from China suggested the opposite possibility of more rate hikes and higher reserve requirements for Chinese banks.
For the first nine months of 2007, the Chinese economy grew at a blistering double-digit pace of 11.5 per cent, while inflation averaged 4.14 per cent – quite a bit higher than the 3 per cent targeted by China’s central bank.
On the other hand, US financial markets started Wednesday trading with the bad news that existing US home sales for September had registered a slightly worse than expected month-on-month fall of 8 per cent, and a larger than expected US$7.9 billion write-down by US investment bank Merrill Lynch – the latter caused in large part by losses related to sub-prime mortgage lending activities or assets.
And externally, news of another jump in oil prices also weighed heavy on the greenback in Asian trading yesterday. Brent crude for December delivery vaulted above the US$86 per barrel mark at the start of London trading to mark out more unexplored territory – just one day after making fresh highs in excess of US$85 per barrel.
And, following the overnight rumours of further US interest rate cuts, it was the high-yielding Australian and New Zealand dollars that finished with some of the day’s best gains yesterday.
All told, however, it was gold that emerged as the day’s top performer, surging more than one per cent to finish the session at US$765 per ounce, just US$5 shy of this month’s 17-year peak of US$770.
Meanwhile, the Australian and New Zealand dollars chalked up gains of up to 0.7 per cent, to 90.32 and 75.58 US cents respectively. And elsewhere in Asian trading, the besieged greenback closed with further losses of 0.4 to 0.6 per cent – at S$1.4565, 44.05 Philippine pesos, 3.3560 ringgit, 1.1690 Swiss francs, and US$1.4280 per euro.
Source: Business Times 26 Oct 07