Weekly overview and analysis. - March 02 2009 - March 09 2009


USD strengthened against most currencies last week as US stocks tumbled and central banks in Europe slash its rate to record low, increasing appeal of the dollar as safe haven from financial turmoil and currency devaluation as Fed interest rate had reached the bottom. Demand for the dollar remained strong last week as investor took refuge under the greenback after Fed Chairman Bernanke said the banking system isn't yet stabilized and as economists said consumer spending increase in January will not last as consumer are only taking advantage of post-holiday discounts and the trend is unlikely to last as joblessness increase. The dollar reached a 3-month high against the euro last week as Europe's services industries contracted at a record pace in February and Germany retail sales fell twice as much as forecast, suggesting measures taken by governments in Europe failed to stall pace of economy contraction in the region and more measures which probably be needed and may result in rising supplies of the euro into the market.

The dollar retreated by late last week on speculation US senate will soon approve a spending package worth $410Billion. Reports showing US job losses slowed in February and consumer credit increased in January for the first time in 4 months on Friday gave investor a good reason to take profits after recent gains and reduce holdings before the weekend. The dollar are likely to be on range trading in between 1.2550 – 1.2950 this week, but are likely to end up in weaker territory by the end of this week, but be alert to any statement/speech from members from the Fed and Treasury as their words are sensitive especially in times when uncertainty clouds the stocks. Monitor this week's US economic releases – Fed Chairman Bernanke speaks on bank regulation, US wholesale inventories, US IBD/TIPP Economic optimism, US ABC Consumer confidence, US Advance retail sales, US Initial jobless claims, US Business inventories, US Trade balance, US Import price index and University of Michigan consumer confidence index -, cross currencies important economic releases, Fed/Treasury or other central banks' member' statements/comments, US indexes movement, news related to major corporate and speculation of any fiscal package.


JPY fell against most currencies last week despite global stocks retreated, sending the Dow Jones Industrial Averaged  to the lowest level in more than 12-years as commodities rose, sending raw material producer and energy shares higher. The yen lost its previous momentum last week as most economists and the country's central bank members expect the region's economy continue to contract despite earlier government's effort to stem the free falling economy in the country as demand for Japanese made goods tumbled on rising unemployment abroad and shrinking consumer spending as worsening economy sapped their confidence amid financial turmoil. Last week growing speculation on possibility of China's Premier Wen expanding the stimulus package which later turned out to be  fruitless after Premier Wen said that the country's 8% extension target for this year is within reach and uttered no thoughts of expanding the stimulus package, but the speculation proved to be enough to make a impact on yen by pushing the currency lower as most investors and economists expected he currency lower even before the speculation arise.

The yen further retreat as investors reduce holding of the currency after reports showed US job losses slowed in February and US consumer credit increased in January for the first time in 4 months, reducing demand for the currency as refuge from financial turmoil. The yen should strengthen against most major currencies this week after recent retreat and as stock market may remain weak on selling pressure. Monitor this week's Japan economic releases – Japan Adjusted current account, Japan Trade balance, Japan M3, Japan Eco watchers surveys, Japan Leading index, Japan Coincident index, Japan Machine tool orders, Japan Machine orders, Japan Domestic corporate goods price index, Japan GDP, Japan Industrial production, Japan Consumer confidence and Japan Household consumer confidence -,  cross currencies important economic releases, central banks' member's statements/comments, US indexes movement, commodities performance, news related to major corporate, governments' measure/plan to stem weakening economy and speculation on any additional measure to stem falling economy.


EUR fell against the dollar last week despite investors' reduce holding of the greenback as figures showed Euro-zone's economy continue deteriorate at a faster pace than expected, making the dollar fundamentally stronger than the euro. Hungary's President proposal for a $227Billion loan to eastern European economies has been vetoed by European Union leaders as the Euro-zone's 16-nation bloc sharing the same currency are at risk of falling apart. Figures showed Europe's services and manufacturing industry contracted at a record pace in February, while Germany retail sales fell more than twice economists expected in January, pushing the region's economy deeper into recession. ECB slashed its interest to 1.5% last week, the lowest level on record and the central bank's President Trichet indicated officials will cut the benchmark interest rate further to combat a deepening recession, putting some pressure on the euro while investors and economist speculates that ministers in the region's may propose additional measures to bolster the region's economy, which may include possible measures that may be similar to UK's recent steps which is to prints more of its currency  to help revive Euro-zone's economy.

The euro recoup some of its earlier losses by late week as US stocks market repeatedly rebounded at last hour of trading last week, catching investors off-guard and reports showed US job losses slowed in February and US consumer credit increased in January for the first time in 4 months, giving traders additional reason to exit positions ahead of weekend. The euro may slightly strengthen against most currencies this week on buying interest and some selling pressure on the dollar after recent gains. Monitor this week's Euro-zone economic releases – BOF Business sentiment, Euro-zone Sentix investor confidence, Germany Import price index, Germany wholesale price index, Germany CPI, Germany Trade balance, Germany Current account, Germany Imports, Germany Exports, France Industrial production, France Manufacturing production, France Trade balance, Italy PPI, Euro-zone PPI, Germany Factory orders, France CPI, France NFP, Publication of ECB's monthly report, Italy GDP, Italy Private consumption, Italy Exports, Italy Imports, Euro-zone Industrial production, Germany Industrial production, France Current account and Euro-zone Retail sales -, cross currencies important economic releases, central banks' member's statements/comments, news related to major corporate, US indexes movement, and governments' measure to bolster the economy.

Crude oil

Crude oil rose last week as stocks in US fell, raising appeal of commodities as alternative investment and Iran's oil minister said OPEC will be implementing its biggest ever supply cut, while there has been some minor attacks targeting oil pipelines in Nigeria, forcing Shell Plc to shut some of its production. Dow Jones Industrial Average reached the lowest level in more than 12 years last week, forcing investors to sought commodities as an alternative investment, and away from tumbling stocks. Part of the event that supported oil rally last week was the speculation on China Premier Wen expanding the stimulus package which later turned out to be only speculation, but enough to make an impact on overall commodities, especially in times of depressing commodities market where investors tend to clings to any relevant speculation that may have a chance to bolster energy and raw material demand in near-future.

An unexpected decline in crude oil inventories  and smaller than expected gain in gasoline inventories reported by the Energy Department last week gave oil prices the support it needed to maintain its upside till the end of the week. Crude oil are likely to retreat this week on selling pressure after last week gains and Saudi Arabia may support for holding the group's production quota unchanged as December's production cut are starting to take effect on the market and an excessive production cut may burden major energy consuming countries further amid financial turmoil. Monitor this week's US economic releases, central banks' member's statements/comments, news related to major corporate, US indexes movement, USD movement, geopolitical risk, major corporate fiscal results, stimulus to bolster economies and storage report.

Loh Chang Yuen,

Junior Strategist

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