Dollar Weakens As China Stimulus Talks And Spanish Reforms Lift Risk-sentiment

Dollar Weakens As China Stimulus Talks And Spanish Reforms Lift Risk-sentiment


The US dollar lost ground in Asian trading on Friday as traders sought riskier assets on hopes that China may stimulate its slowing economy and the Spanish government's reform-aiming budget would provide the debt-ridden nation a step closer to a bailout under the European Central Bank's OMT programme.
The Spanish Cabinet approved a budget that proposed a deficit cut of 4.5 percent of GDP in 2013, down from a target of 6.3 percent this year. The debt-striving nation will cut spending equal to 0.77 percent of GDP and plan to have revenue based cuts around 0.56 percent to manage its debt imbalances.
Economic reports from the U.S. Overnight were mixed, with the Labor Department reporting a much bigger than expected drop in weekly jobless claims that fell to a 10-week low.
Meanwhile, the Commerce Department released a pair of disappointing reports on durable goods orders and Q2 GDP. Durable goods orders plummeted by 13.2 percent in August amid a sharp drop in orders for transportation equipment, while GDP grew by less than previously estimated in the second quarter.
The dollar reached 77.45 against the yen, its lowest level since September 13. Technical bias is bearish for the pair as it is tracking lower towards a major support level of 76.0. The near-term support target for the dollar-yen pair is visible around the 77.0/77.15 area.
Industrial output in Japan declined a seasonally adjusted 1.3 percent on month in August, missing forecasts for a fall of 0.5 percent after shedding 1.0 percent in July. On a yearly basis, industrial production fell 4.3 percent.
Japan's core inflation rate came in at -0.3 percent on year, exactly as expected and unchanged from the July reading. Overall inflation was -0.4 percent on year, beating forecasts for -0.5 percent after showing -0.4 percent in the previous month. On month, core CPI was up 0.2 percent and overall inflation was up 0.1 percent.
Retail sales in Japan were up 1.8 percent worth 11.141 trillion yen on month in August, topping forecasts for a contraction of 0.3 percent following the upwardly revised 0.7 percent decline in July. On a seasonally adjusted monthly basis, retail sales were up 1.5 percent.
Japan's unemployment rate came in at a seasonally adjusted 4.2 percent in August, beating expectations for 4.3 percent.
The dollar dropped to a 3-day low of 1.6267 against the pound around 1:50 am ET. The near-term technical outlook shows the dollar extends its downtrend as the cable is heading towards re-testing the 1.63 level again after a gap of a week.
Confidence among British consumers increased in September to reach its highest level since June 2011, offering "some grounds for optimism" to the government, research firm GfK NOP said today. The consumer confidence index improved to -28 in September from -29 in August.
The greenback also fell to 3-day lows of 1.2943 against the euro and 0.9353 against the Swiss franc in late Asian deals Friday. The dollar bears are expected to flex their muscles against both the euro and the Swiss franc as their recent rallies seem to have a trend correction. On the downside, the greenback may find support levels at 1.3170 against the euro and 0.9250 against the Swiss franc.
Looking ahead, French consumer spending and producer prices, Italian PPI-all for August and the Italian and the eurozone inflation data for September are the key economic data to watch in the European session.
The U.S. Personal income and spending for August, Chicago PMI and the University of Michigan confidence-both for September are the major releases that may provide further cues for the foreign exchange market in the North American session.