Forex: Range-trading and consolidation in thin conditions continues to be the main theme in currency markets, and the buck continues to look strong. Traders picked up on an article written by The Telegraph's Ambrose Evans-Pritchard, who suggested that China has resorted to stealth intervention in the currency markets to amass USD. 'A study by HSBC's currency team in Asia has concluded that China's central bank is in effect forcing commercial banks to build up large dollar reserves, using them as arms-length proxies in a renewed campaign of exchange rate intervention,' he wrote. If Evans-Pritchard's theory turns out to be correct, it not only raises questions about the sustainability of the greenback rally, but also highlights the adverse impact of a rising CNY on China's exporters. EUR/USD broke below minor hourly support at 1.4720 in the early Asian morning, but the pair has since then found support around 1.4700, near yesterday's low.
Traders heard rumors suggesting that the sovereign name that sold EUR/USD above 1.4800 yesterday might be buying on dips, limiting further downside for EUR/USD.
New Zealand's trade deficit deteriorates more than expected: (NZ JULY TRADE BALANCE: -781M V -538M expected, prior revised to -207M from -223M; Imports: 4.2B v 4.0B expected, 3.81B prior; Exports: 3.42B v 3.45B expected, 3.59B prior) The deficit for the full year to July was NZ$4.4B, or 10.9% of total exports, but the figure is lower than the deficit of NZ$6.3B recorded for the year to July 2007. The NZD dropped sharply in the hours after the release, with NZD/USD moving all the way down to an 11-day low of 0.6963. New Zealand's annualized trade balance has been in deficit since July 2002, and continues to be a drag on the NZD.
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