<TABLE cellSpacing=0 cellPadding=0 width=452 border=0><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published March 20, 2009
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>US$ hit by Fed move, more losses feared
By LARRY WEE
SENIOR CORRESPONDENT
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THE US dollar notched one of its sharpest losses this year in Asian trading yesterday, following news that the US central bank would pump more than US$1 trillion into the banking system over the coming months.
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</TD></TR><TR class=caption><TD></TD></TR></TBODY></TABLE>What one commentator described as the Fed's 'shock and awe' move was the Wednesday night news that it intends to buy up to US$300 billion in long-term US Treasury paper over the next six months, as well as up to US$750 billion in mortgage-backed securities and US$100 billion worth of agency debt over the remainder of 2009.
The financial market response to the Fed's aggressive quantitative easing (or QE) move came fast and furious. The yield on benchmark 10-year US Treasury notes tumbled half a per cent to a two-month low of 2.47 per cent in overnight trading, Wall Street's stock indices closed yet another 2 per cent higher, and the greenback fell back sharply.
Compared to its Wednesday highs, the greenback tumbled as much as four Swiss centimes, three Japanese yen and two Singapore cents yesterday in Asia. On a broader indexed basis, it sank more than 3 per cent, reportedly its worst one-day percentage fall in more than 20 years.
Elsewhere, the euro and pound sterling each jumped as much as five US cents and Down Under, the Australian and New Zealand currencies ended more than two US cents firmer. All told, the greenback finished the Asian session with outsized losses of more than 3 per cent each at 95.58 yen, 1.5394 Swiss francs, US$1.2486 per euro, and 54.38 US cents per New Zealand dollar. Closer to home, it was at least one per cent worse off at S$1.5190, 50.49 Indian rupees and 1,397 Korean won.
Explained UOB researchers yesterday: 'This could signal a beginning of a weakening US dollar trend and while inflation remains on a backburner for now, longer term inflation concerns are likely to return as the economy turns and banks convert the existing liquidity into credit. 'This we think is supportive of commodities, especially crude oil and metals, and should structurally benefit the Canadian and Australian dollars.'
Others made the point that in the current circumstances, the effect of monetary policy responses will be less than effective when compared to fiscal initiatives.
JP Morgan researchers, however, cautioned: 'Despite the bearish US dollar reaction in Asia, we warn that Asia's resolve to stem US dollar weakness remains strong, even if they are unlikely to pursue QE for now.'
In terms of market positioning, however, one senior market player warned that currency traders may have already positioned themselves for a stronger greenback versus the Singapore dollar ahead of next month's semi-annual monetary policy review by the Monetary Authority of Singapore.
That said, Alan Ruskin of RBS suggested that there was little mileage to be gained from trying to fight the printing press either. 'This could be cast as a sign of desperation, but confirms that (Fed Chairman Ben) Bernanke will do whatever it takes to get some hold of the problem,' he said.
</TD></TR></TBODY></TABLE>
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>US$ hit by Fed move, more losses feared
By LARRY WEE
SENIOR CORRESPONDENT
<TABLE class=storyLinks cellSpacing=4 cellPadding=1 width=136 align=right border=0><TBODY><TR class=font10><TD align=right width=20>
</TD><TD>Email this article</TD></TR><TR class=font10><TD align=right width=20>
</TD><TD>Print article </TD></TR><TR class=font10><TD align=right width=20>
</TD><TD>Feedback</TD></TR></TBODY></TABLE>THE US dollar notched one of its sharpest losses this year in Asian trading yesterday, following news that the US central bank would pump more than US$1 trillion into the banking system over the coming months.
<TABLE class=picBoxL cellSpacing=2 width=100 align=left><TBODY><TR><TD>
</TD></TR><TR class=caption><TD></TD></TR></TBODY></TABLE>What one commentator described as the Fed's 'shock and awe' move was the Wednesday night news that it intends to buy up to US$300 billion in long-term US Treasury paper over the next six months, as well as up to US$750 billion in mortgage-backed securities and US$100 billion worth of agency debt over the remainder of 2009.The financial market response to the Fed's aggressive quantitative easing (or QE) move came fast and furious. The yield on benchmark 10-year US Treasury notes tumbled half a per cent to a two-month low of 2.47 per cent in overnight trading, Wall Street's stock indices closed yet another 2 per cent higher, and the greenback fell back sharply.
Compared to its Wednesday highs, the greenback tumbled as much as four Swiss centimes, three Japanese yen and two Singapore cents yesterday in Asia. On a broader indexed basis, it sank more than 3 per cent, reportedly its worst one-day percentage fall in more than 20 years.
Elsewhere, the euro and pound sterling each jumped as much as five US cents and Down Under, the Australian and New Zealand currencies ended more than two US cents firmer. All told, the greenback finished the Asian session with outsized losses of more than 3 per cent each at 95.58 yen, 1.5394 Swiss francs, US$1.2486 per euro, and 54.38 US cents per New Zealand dollar. Closer to home, it was at least one per cent worse off at S$1.5190, 50.49 Indian rupees and 1,397 Korean won.
Explained UOB researchers yesterday: 'This could signal a beginning of a weakening US dollar trend and while inflation remains on a backburner for now, longer term inflation concerns are likely to return as the economy turns and banks convert the existing liquidity into credit. 'This we think is supportive of commodities, especially crude oil and metals, and should structurally benefit the Canadian and Australian dollars.'
Others made the point that in the current circumstances, the effect of monetary policy responses will be less than effective when compared to fiscal initiatives.
JP Morgan researchers, however, cautioned: 'Despite the bearish US dollar reaction in Asia, we warn that Asia's resolve to stem US dollar weakness remains strong, even if they are unlikely to pursue QE for now.'
In terms of market positioning, however, one senior market player warned that currency traders may have already positioned themselves for a stronger greenback versus the Singapore dollar ahead of next month's semi-annual monetary policy review by the Monetary Authority of Singapore.
That said, Alan Ruskin of RBS suggested that there was little mileage to be gained from trying to fight the printing press either. 'This could be cast as a sign of desperation, but confirms that (Fed Chairman Ben) Bernanke will do whatever it takes to get some hold of the problem,' he said.
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