Thursday, 3 June 2010

Yen falls, US stocks jump

The focus of attention in currency markets shifted to the yen after the dramatic resignation of the Japanese prime minister on Wednesday. Bloomberg reports:

The yen dropped the most versus the dollar in more than three weeks after Prime Minister Yukio Hatoyama resigned, fueling concern Japan’s new leadership will pursue policies that may weaken it.

The Japanese currency fell against most major counterparts on speculation Hatoyama will be succeeded by Finance Minister Naoto Kan, who has called for the Bank of Japan to do more to fight deflation. Higher-yielding currencies including New Zealand’s dollar and Brazil’s real rose. The euro was near a four-year low versus the greenback on concern Europe’s efforts to cut budget deficits will hamper its economic revival...

Japan’s currency depreciated 1.3 percent to 92.13 yen per dollar at 5 p.m. in New York, from 90.94 yesterday. It slid as much as 1.6 percent, the most on an intraday basis since May 10, and touched 92.36, the weakest level since May 18.

Japanese stocks were also down on Wednesday, the Nikkei 225 falling 1.1 percent to 9,603.24.

In contrast, US stocks were buoyant on Wednesday. MarketWatch reports:

U.S. stocks rallied Wednesday to reclaim most of the losses suffered during a two-session retreat, as investors scooped up energy stocks and other battered shares.

"Today's bounce back is helping some of yesterday's biggest losers," said Bruce McCain, chief investment strategist at Key Private Bank.

After losing 234.97 points, or 2.3%, during the past two trading days, the Dow Jones Industrial Average on Wednesday regained nearly all of that territory, rising 225.52 points, or 2.3%, to 10,249.54.

US economic data released on Wednesday were mostly positive. Reuters reports:

Pending home sales hit a six-month high in April, data showed on Wednesday, but falling demand for home loans pointed to ebbing activity in the vital housing market due to the expiration of a popular tax credit for buyers...

The National Association of Realtors' Pending Home Sales Index, based on contracts signed in April, increased 6 percent to 110.9 -- the highest level since October and above expectations of a 5 percent rise. It was the third straight month of gains.

But applications for loans to buy homes dropped last week for the fourth straight week, holding at 13-year lows, the Mortgage Bankers Association said...

Another report showed the number of layoffs announced at U.S. companies almost unchanged in May from April when they touched a four-year low as employers were more upbeat about the economic outlook...

Major automakers recorded double-digit U.S. sales gains in May from depressed year-earlier levels as industry-wide sales ticked up for a seventh consecutive month with a boost from orders by rental agencies, data showed.

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