Asian Currencies Are Under Pressure - 24.7.2013

On Wednesday morning, the US dollar managed to strengthen against major currencies after the block of statistics from Asia. In particular, the figures showed that Japanese exports slowed down in June, gaining just 7.4% on an annualized basis, far less than it was in average expected by market participants. Exports to China, one of the most important trading partners of Japan, rose by 4.8%, after rising by 8.3% in May. In this regard, the US dollar against the Japanese yen is staying around 100.

The Australian inflation data strike out was the next one in line. In spite of expectations the overall CPI increase for second quarter was 2.4% on an annualized basis, instead of 2.5%. On the other hand, the weighted inflation figures used by the RBA, were slightly higher than the market expectations. However, the Australian dollar vs. the US dollar has not been able to overcome the resistance at 0.93 at the beginning of the European session and slipped down to 0.9250.

At the end of Asian story, the preliminary PMI data for China from HSBC / Markit have come out, showing the activity lowering in the industry - the index dropped from 48.2 to 47.7, and it only intensified fears of reducing the overall economic activity level in the country. But, we are waiting for the official statistics. However, the pressure on Asian currencies has only grown, and the dollar was able to find additional external support.

The more interesting part of the week in terms of statistics and potential movements in the markets starts today. Following the data from Asia, we are waiting for the Euro zone PMI for July. Market participants are counting on the growth in figures for both sectors (manufacturing and services). However, the indexes are likely to remain below the 50 level, reflecting the decrease in activity, but then we have the main question - how much lower? We are waiting for the US home sales data in June coming out in the evening. We keep in mind that the secondary market sales data were much lower than expected and it increased the pressure on the US dollar earlier this week.