Dollar Down, Equities Up

The US dollar is broadly lower to start the new week as the markets respond positively to the somewhat stronger than expected Chinese data reported over the weekend and the Basel III proposals which allow an eight year implementation period.

Contrary to pre-weekend speculation there was no Chinese rate hike or intervention by Japan. The euro’s advance appears to be stalling after the Asian gains were extended in Europe to $1.2835. Still, without fresh trading incentives in North America today support in the $1.2750 area should remain intact.

For its part, sterling once again finds good offers as $1.55 area was approached. At the same time, the bottom end of the recent range remains intact near $1.5340.

The dollar approached last week’s high, recorded last Monday near JPY84.50, in Asia and was capped by talk of exporter offers and the re-establishment of interbank positions. Support now is pegged in the JPY83.60-80 area.

Global equity markets are higher. The MSCI Asia-Pacific Index advanced about 1.4% to reach its highest level since early May. Chinese data helped spur the rally. Industrial output in the world’s second biggest economy rose 13.9%. The consensus was for an increase of 13% from a year ago. Fixed urban investment, new loans and retail sales were stronger than expected. European markets are also reacting to that, but in addition find seem to have concluded, at least initially, that Basel III is not as onerous as may have been feared and the financials are the strongest sector.

In fact, near midday in London, the financial sector of the Dow Jones Stoxx 600 is up nearly twice the overall index’s 1% gain. The outperformance of the financials today is even more evident in Ireland, where the financial sector is up more than 4%, helped, in part, by talk of asset sales to a Spanish bank.