* Risk of short USD covering in thin trade rises
* Credits enjoy blockbuster week, issuances bloom
* Silver consolidates after stunning rise
By Saikat Chatterjee
HONG KONG, April 29 (Reuters) - The dollar floundered at
three-year lows against a basket of currencies on Friday,
keeping precious metals near record highs, although the risk of
dealers covering bets against the beleaguered U.S. currency in
thin trading looms, especially given holidays in some centres
including Japan.
However, the medium-term outlook continues to be for dollar
weakening, given U.S. Federal Reserve Chairman Ben Bernanke's
pledge to continue with the ultra-easy monetary policy, which
would keep the dollar's yield at a disadvantage to other
currencies.
With a fresh batch of U.S. economic data in the form of
rising claims for jobless benefits also offering no succour to
the ailing dollar, the dollar's index , which tracks its
performance against a basket of major currencies, fell to its
lowest level since July 2008 before recovering somewhat.
It is down 1.4 percent so far this week, poised for its
worst week since Jan. 22.
"The likely indicator of a reversal in the USD's
(mis)fortunes is global equities. A sustained bout of
profit-taking would assuredly spillover into foreign exchange
markets, with the EUR and AUD returning back to earth," said
Michael Woolfolk, strategist at BNY Bellon.
For now, that reversal looked unlikely with world equities
up by some 5 percent in the past two weeks while
Asian stocks outside Japan hovering close to a
three-year peak hit on Thursday.
On Friday though, stocks ran out of steam as traders took
profits after a recent rally with Australian shares
falling by one percent with miners leading losses due to the
strong Aussie while rising mortgage rates kept Hong
Kong stocks under pressure.
"It's across the board, apart from the banking sector...the
high Aussie dollar is now starting to weigh on this market,
particularly with the miners," Burrell Stockbroking dealer Jamie
Elgar said.
The Australian dollar stood at $1.0910, still
within easy reach of a 29-year peak of $1.0948, having gained
nearly 13 percent since the March lows.
ROARING CREDIT
While equities had a somewhat lukewarm week, Asian credit
markets had a smashing one with investors snapping up issuances
out of the region and credit spreads narrowing substantially.
Primary markets enjoyed one of their best weeks with
Indonesia's $2.5 billion dollar bond sale garnering blockbuster
demand while a Chinese utility company and a Philippine port
operator pushed through perpetual bond offerings.
Robust demand for perpetual bonds or perps indicated that
investors were scampering to lock in high yielding rates in an
otherwise low interest rate environment with outlook positive
for yields.
Weekly average of issuances in the first 17 weeks of the
year is nearly $2 billion helping the Asia ex-Japan year to date
total a whopping $33.45 billion. The weekly average of supply is
nearly a fifth higher than the average for 2010.
Elsewhere, the Chinese yuan cracked through the
6.5 per dollar line for the first time, indicating Beijing's
determination to fight inflation and giving a leg up to other
currencies.[]
In commodities, silver consolidated overnight gains
after rising to $49.51 per ounce, its highest since 1980, helped
by the weakening dollar, while NYMEX crude for June <CLc1>
stabilised near the $113 per barrel mark.
Thursday's batch of weak U.S data meant bonds had yet
another good day with benchmark ten-year U.S. yields
steadying near 3.32 percent after falling by more than a
quarter-point from this month's highs.
* For Reuters Global Investing Blog, click on
http://blogs.reuters.com/globalinvesting
* For the MacroScope Blog, click on
http://blogs.reuters.com/macroscope
* For Hedge Fund Blog, click on
http://blogs.reuters.com/hedgehub
(Additional reporting by Ian Chua in SYDNEY and Umesh Desai;
Editing by Ramya Venugopal)
