Cramer: Hurt by China, Greece

29 May 2015 | Author: | No comments yet »

China’s yuan and euro strengthen, but yen stays weak.

China’s onshore yuan strengthened to a one-week high at 6.2019 against the US dollar at 11:30 am on Friday as traders said a correction in the mainland stock market and a recovery in the euro has hurt the US dollar.“The next big data release from the United States or the next confirmation of an interest rate hike, whenever that will come, I think that’s when we are going to see the final washout in gold”, Reuters quotes Mitsubishi Corp’s precious metals strategist Jonathan Butler in London. “The market is kind of striking this in-between, wanting better economic data but then the flipside meaning the Fed is that much sooner to raising rates”, said Walter Todd, who oversees about $1 billion as chief investment officer for Greenwood, South Carolina-based Greenwood Capital. Comex gold futures have declined 1.32% this week compared to -0.21% for the S&P 500 Index, -0.62% for the Euro Stoxx 50 Index, and -3.42% for the crude oil futures. At 0800 GMT the euro was back above $1.09, up 0.4 per cent on the day, while the dollar was down slightly against the yen dipping below 123.00 yen, having scaled that level on Tuesday for the first time in almost eight years.

Minori Uchida, head of Tokyo global market research at the Bank of Tokyo-Mitsubishi UFJ, said the dollar lost its vigor amid a lack of strong cues to test higher ground following its recent surge. He also said the stronger yuan is related to the correction of the Shanghai and Shenzhen stock market on Thursday when both markets dropped about 6 per cent. “The currency market usually trades in a different direction from the stock market because some traders trade in both markets for the carry trade. Traders are allowed to trade two per cent above or below the midprice which is set by the PBOC daily every morning at 9:15 am. “Japanese yen usually trades strongly in March and April when the country is making its own budget and closing its financial year.

April durable goods orders will be followed by S&P / Case-Shiller house prices and then Markit flash Services PMI, new home sales for April, consumer confidence and regional manufacturing surveys from the Richmond and Dallas Federal Reserves. European shares fell on Tuesday and sterling rose to a 2-1/2 month high against a struggling euro as Greece’s ongoing debt drama offset bumper airline results. In Japan, the April core inflation excluding the sales-tax levy is still at zero percent year-on-year, making it more likely for Japan to ease monetary policy further.

With the rising volatility in global stocks and currencies and the protracted debt negotiations between Greece and its creditors, the gold prices will get a near-term support from politics and the market volatility. The pan-European FTSEurofirst 300 (FTSE International:.FTEU3) closed around 0.1 percent lower, with the French CAC (Euronext Paris:.FCHI) index ending around 0.5 percent lower. The yen has fallen 4.3 percent against its U.S. counterpart in the past month, following the Brazilian real and the New Zealand dollar as the worst performers among 16 major currencies, according to data compiled by Bloomberg.

Nevertheless, Q3 is a seasonally strong quarter for gold demand although a possible but not guaranteed Fed rate hike in September could counter the seasonal effect.

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