FOREX ASIA UPDATE - USD

The US dollar was a little stronger in the US session, boosted by stronger housing data and benign CPI inflation, with EURUSD trading down to a low of 1.2501 from 1.2549. As has been typical in recent weeks and months, the lack of clear themes in the market has been fueling investor appetite for risk, and equity markets pushed higher overnight, while high-yielding crosses such as NZDJPY outperformed.

Housing starts for September rose by 5/9% m/m, against market expectations of a monthly decline, although the positive sheen was dulled by a decline in the more reliable and less volatile building permits.

Meanwhile, headline CPI for September declined on the month, but core CPI rose by 0.2% m/m, inline with expectations.

The market has completely unwound expectations of a Fed rate cut in recent weeks and the data overnight will do little to challenge the symmetrical near-term outlook for the Fed.

While the US dollar keeps its high-yielding status and the Fed seems unwilling to consider near-term rate cuts, we expect the dollar to stay firm in the next few weeks before falling again over a three-month time horizon.


Todays Data Release, jobless claims are due at 1230 GMT. Treasury Secretary Paulson speaks at 1330 GMT, but the topic does not seem conducive to market moving comments (he's participating in "Get Smart About Credit Day"). Fed's Poole speaks at 1345 GMT, and the Philly Fed for October is due at 1600 GMT, with the market projecting a reading of 7 versus -0.4 in September.