DAILY FOREX REPORT 18/JULY/2014

MARKET HEADLINES

• US dollar recedes in Asia after recent pick-up The dollar retreated in Asia Thursday after rallying in the previous session in response to an upbeat US Federal Reserve economic report and better-than-expected Chinese growth figures. In midday Tokyo trading, the greenback fetched 101.52 yen, against 101.69 yen in New York Wednesday. The euro edged up to $1.3539 from $1.3524, while the single currency slipped to 137.36 yen from 137.55 yen in US trade. The greenback had been enjoying some buying in recent days thanks to a generally upbeat outlook and healthy earnings reports that had also helped push stock markets higher. On Wednesday, the Fed's regional Beige Book report said the US economy continued to pick up steam, with all 12 economic regions of the country showing growth in the six weeks to July 7 -- marking the second report in a row to do so. It is also the latest evidence the US economy is picking up steam after unusually cold weather depressed activity in the first quarter. A day earlier Fed chief Janet Yellen suggested interest rates could rise earlier than expected if the economy continues to pick up pace. In China official data showed the world's number two economy expanded 7.5 per cent year on year in the April-June quarter, better than the 7.4 percent in the previous three months and beating forecasts of 7.4 per cent. Attention will now turn to the release of US data, including on jobless claims and housing starts. "It is mainly a US data focus tonight, but fairly steady outcomes are anticipated," National Australia Bank said in a research note.
• Yuan edges up after China posts slightly stronger-than-expectedQ2growth The yuan edged up against the dollar on Wednesday after China's economic growth for the second quarter came in moderately better than expected, helping to offset a weaker central bank midpoint. Spot yuan stood at 6.2066 by midday, up 0.02 per cent from Tuesday's close. "The slightly better-than-expected GDP figures help to reinforce market participants' stance on going long on the yuan for now," said a trader from an Asian bank in Shanghai. China's economy grew 7.5 per cent between April and June from a year earlier, slightly above expectations and quickening from the 7.4 per cent pace in the first quarter, reinforcing hopes that a recovery is under way after a flurry of government stimulus measures. With market anticipation of yuan appreciation rising recently due to China's improving economic data, the People's Bank of China (PBOC) appeared to have acted to dampen excessive bullish sentiment on the Chinese currency. On Wednesday, the PBOC fixed its midpoint 0.07 per cent weaker at 6.1535 per dollar, a move seen largely in line with a strengthening in the U.S. currency in global markets. The dollar index rose 0.25 per cent overnight and clung to modest gains early on Wednesday after bulls latched onto a comment by the head of the Federal Reserve that rates could raise sooner if employment continued to improve.

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