To: yard_man who wrote (6215 ) 5/12/2004 1:44:38 PM From: mishedlo Respond to NY FX: Mkt Reverts to Dlr Buying, Shrugs Off Record Trade GapMarket players ignored a record U.S. trade deficit, seen as a dollar negative, and reverted back to a dollar buying trend, leaving the euro somewhat soft and dollar-yen bid at midday Wednesday, traders said. Indeed, the strong import demand (up 4.6%) seen in the U.S. international trade deficit for March ($46 billion, beating January's prior record at $43.46 billion) seemed only to support the case for higher U.S. interest rates and therefore also lent support to the dollar, they said. The euro was trading at $1.1906 at 11:55 a.m. EDT, off the day's highs at $1.1940, seen in the wake of the trade release, and up from the day's lows at $1.1836, seen overnight. Ahead of the trade report, euro-dollar had been trading near $1.1850; traders are now gearing up for a retest of that level. In other currencies, dollar-yen was trading at Y113.23, off the day's highs at Y113.47 seen after the U.S. data releases and up from the day's lows at Y112.44, seen overnight. Euro-yen was trading at Y134.81, on the high side of the day's Y133.31 to Y134.99 range. Sizable U.S. investment bank demand for euro-yen after the U.S. data releases served to underpin both the euro and dollar-yen earlier in the session, traders said. Players were careful not to read too much into the day's trading action, noting that the euro was still trapped largely in a $1.1800 to $1.2000 range, with dollar-yen in a Y112.70 to Y114.00 range. Until a decisive close is seen outside these barriers, a new short-term trend may be hard to predict, they said. "Stop hunting" was the cause of the bulk of the day's FX action, with speculators out in full force. "The day traders are running the show. The longer term players are just sitting tight," said one U.S. trader. "They find out who has what position and then they search for the stops and then trigger them," he said. Ahead of the remainder of the week's U.S. data releases (PPI, CPI, retail sales, capacity utilization, preliminary Univ. of Michigan consumer sentiment), which are expected to support a Fed hike sooner rather than later, few accounts want to hold a short dollar position, the trader reminded. In other markets, U.S. stocks were off at midday, with the Dow Jones industrial average off 106 points at 9,914 and the Nasdaq Composite down 42 points at 1,888 at 11:54 a.m. EDT. Spot gold was trading at $380.50/oz., in the middle of the day's $378.20 to $383.90 range.fxstreet.com
