New York Session Recap

The U.S. dollar drifted lower as it was the Japanese yen and Swiss franc that had the stronger safe haven appeal today. USD/JPY dropped to current levels around 85.30/35 from highs near 86.25/30 and USD/CHF tested its 1.0350 support after falling from earlier highs near 1.0575. Poor data out of the U.S. and news that China (who holds the largest foreign-exchange reserves in the world at $2.45 trillion) favors the euro over the dollar sent the greenback lower. The NY Fed's August empire manufacturing Index missed expectations coming in at 7.10 below the 8.30 consensus (prior 5.08). Demand for U.S. long-term financial assets increased as the net buying of long-term securities rose to $44.4bln for June (cons. $45.7bln) from the prior month's $35.3bln. Total net TIC flows experienced their first decline since January as the June number printed a -$6.7bln drop (far missing the +$40.0bln expectations) from the prior +$17.1bln. The numbers show a flight to safety with increased investor demand for U.S. Treasuries and selling of equities and corporate bonds in the current risk averse environment. August NAHB housing market index was also released earlier and showed a decline to 13 from the previous reading of 14 (cons. 15). EUR/USD rose as high as about 1.2870 from its overnight lows of around 1.2730/35.

U.S. equities were relatively flat on the day with the Dow Jones dropping marginally by -0.01% and the S&P 500 gaining by only +0.01%. Commodities traded mixed with the metals posting gains (gold up roughly +0.74% and silver gaining around +1.39%) and oil sliding by -0.32%. U.S. 10-year yields dropped about 10 bps as investors demanded more Treasuries on risk aversion.

On the calendar for the Asia/Pacific session is the Reserve Bank's Board August minutes out of Australia and China's conference board June leading economic index.