Thursday in Asia, the U.S. dollar and the Japanese yen plummeted against their major counterparts as a gain in stocks on improving corporate earnings reduced demand for safe-haven currencies.
The dollar and the yen are viewed as safe-haven currencies and tend to attract buying when worries about the global economy and financial markets flare up, but can come under pressure when such concerns recede.
Encouraging earnings report from U.S. companies, including Intel Corp (INTC) and JP Morgan Chase & Co (JPM) pushed the Dow Jones Industrial Average up 1.5 percent yesterday to close above 10,000 points for the first time in a year.
Financial services giant JPMorgan reported a sharp increase in third-quarter profit, helped mainly by strong results in its Investment Bank and Retail Banking businesses, which offset losses in Card Services and Consumer Lending segments.
JPMorgan posted third- quarter earnings of $3.59 billion or $0.82 per share, compared with analysts' estimates of $0.52 per share.
Traders reacted positively to retail sales data from the U.S. Commerce Department, with the headline sales figure falling by less than expected despite the end of the government's cash for clunkers program. Excluding auto sales, retail sales actually rose more than expected.
Following a positive close on Wall Street overnight and on optimism the global economy is making a swift turnaround, the Asian stock markets jumped today.
Japan's Nikkei 225 was up 1.7%, Korea's Kospi Composite rose 0.3%, Hong Kong's Hang Seng Index gained 1%, China's Shanghai Composite Index had added 0.7%, Australia's S&P/ASX 200 was up 0.71% and New Zealand's NZX-50 climbed 0.2%.
Expectations of healthy global growth helped oil rise for the sixth straight session today. Oil climbed to near $76 a barrel in Asian deals, touching its highest in a year after a U.S. industry data showed a surprise fall in crude stockpiles, suggesting that demand in the world's top oil consumer is recovering.
U.S. crude for November delivery rose 62 cents to $75.80 a barrel in Asian deals. London Brent crude was unchanged at $73.10.
The strength of crude oil prices has been adding to gold's rise, given the precious metal's traditional role as a hedge against inflation.
Gold held above $1,060 an ounce, just below Wednesday's record high of above $1,070.
The dollar, which closed yesterday's trading at 1.4930 against the euro, fell to 1.4962 during Asian deals on Thursday. This set the lowest point for the dollar since August 15, 2008. On the downside, 1.50 is seen as the next target level for the U.S. currency.
Goldman Sachs said this week that the U.S. dollar is likely to extend declines against the euro and most commodity-backed currencies over the coming six months, based on the greenback's correlation with cyclical assets and capital flows.
The bank now expects the Canadian dollar to reach parity with the U.S. currency in three months. The Australian dollar is expected to peak at 95 U.S. cents.
The dollar plunged to a record low of 1.6040 against the euro in July 2008. Although the dollar gained 23% thereafter, it weakened again after reaching a 2 - 1/2 -year high of 1.2331 in October 2008. Since then, the dollar has lost 18%.
In Asian trading on Thursday, the dollar slipped to a 6-day low of 1.6072 against the pound. If the dollar weakens further, it may test support around the 1.613 level.
The pound declined to near a 5-month low of 1.5710 against the dollar on October 13 as U.K.'s annual inflation slowed more than expected in September to a five-year low.
But the pound recovered its losses thereafter and has gained 2.2% against the dollar thus far.
In Asian deals on Thursday, the dollar declined to a 15-month low of 1.0125 against the Swiss franc. If the dollar-franc pair slides further, it may reach the parity rate. The pair was worth 1.0149 at Wednesday's New York session close.
After hitting a 3-week high of 1.0455 against the franc on October 01, the dollar has dropped more than 3%.
The yen dropped along with the dollar on speculation Goldman Sachs Group Inc. will today join JPMorgan Chase & Co. and Intel Corp. in reporting improved earnings, sapping demand for the Japanese and U.S. currencies as a refuge.
The yen slumped to a 3-week low of 133.93 against the euro in Asian deals on Thursday. The next downside target level for the Japanese currency is seen at 135.5. The euro-yen pair closed yesterday's trading at 133.50.
The Bank of Japan upgraded its economic assessment for the second consecutive month, the latest Monthly Report of Recent Economic and Financial Developments showed today.
The BoJ said the Japan economy has started to pick up compared to its last month's view that economic conditions are showing signs of recovery. Looking forward, the central bank said economic conditions are likely to improve gradually. Last month, the BoJ said economic conditions are likely to start improving in the near future.
The yen has fallen 4% against the euro since it reached a 2 1/2 -month high of 129.06 on October 02.
During Asian deals on Thursday, the yen plunged to near a 3-week low of 88.45 against the Swiss franc. This may be compared to yesterday's close of 88.15. On the downside, 89.4 is seen as the next target level for the yen.
The Japanese currency is weakening against the franc after it reached a 2 1/2 -month high of 85.44 on October 02. Since then, the yen has lost 3.4%.
The yen plunged to 143.80 against the pound in Asian deals on Thursday. That was down 0.6% from yesterday's close of 142.89. If the yen slides further, it may target the 150.4 level.
In Asian deals on Thursday, the yen plummeted to 89.67 against the U.S. dollar. The near term support for the yen is seen around the 90.4 level.
The yen strengthened to a 5-day high of 88.85 against the dollar in Asian deals yesterday as a decline in Tokyo stocks and producer prices boosted demand for the nation's currency as a refuge.
But the yen pared its gains in the European session on the back of strong European equities and the pair closed the day's trading at 89.43.
Investors now look forward to the European session, in which the Italian and the Euro-zone CPI reports for September, the Swiss ZEW economic sentiment index for October and the European central bank's monthly report for October are expected to influence trading.
From the U.S., the consumer price index for September, weekly jobless claims report for the week ended October 10th and the results of the New York Federal Reserve's empire state manufacturing survey for October are scheduled for release at 8:30 am ET.
At 10:00 am ET, the results of the Philadelphia Federal Reserve's manufacturing survey are due out.
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