The Forex Daily Digest – October 1, 2009
The third quarter wasn’t kind to the U.S. dollar. As a matter of fact, the USD fell against most of the major world currencies as the International Monetary Fund cut its projections for losses and write-downs associated with the world’s current economic crisis. The dollar index fell 4.4 percent in the quarter and was down 2.0 percent for the month of September alone. The CAD increased the most in three weeks based on the same IMF projections. U.S. gold futures hit $1,000 an ounce yesterday, finishing 1.5 percent higher on a mixture of a weaker dollar, crude oil rally and building geopolitical tensions in the Middle East.
The IMF also said that the USD’s allocation of world currency reserves fell in the second quarter to the lowest level since the euro was introduced in 1999. The USD’s share fell to 62.8 percent in the quarter ended June 30th, from 65 percent the prior quarter. The USD also lost some ground after Fed Vice Chairman Donald Kohn repeated that the current low interest rates in the U.S. would remain for some months to come.
The USD was lower against major currency rivals yesterday after a pair of reports showed continuing U.S. job losses this month but a less-severe fall in second-quarter activity. The ADP employment report showed private-sector firms dropping 254,000 jobs in September, the fewest positions lost since July 2008. The Commerce Department revised its forecast of real U.S. second-quarter gross domestic product higher; GDP fell 0.7% on an annualized basis, compared to an earlier estimate of a 1% drop. Finally, the Chicago PMI showed an unexpected decline; dropping to 46.1 for September, down from August's reading of 50.0.
The EUR increased against the USD after the European Central Bank (ECB) said it would lend banks 75.2 billion euros for 12 months at the current benchmark interest rate of one percent to improve credit flow and help the economic recovery in the euro-region.
The GBP increased 0.9 percent against the USD, and strengthened for a third day against the EUR after the U.K. consumer confidence report. The AUD gained 1.4 percent against the USD on better-than-expected retail sales. The Australian retail sales report came in at 0.9% versus the 0.6% projected while building permits increased by 3.1%. As a result, the AUD reached a 13 month high with little or no resistance in its way. The NZD extended gains after reports showed New Zealand business confidence climbed this month.
The CHF fell the most in three months against the EUR amid speculation the central bank sold the currency to curb its advance. The franc dropped as much as 0.8 percent, the most since June 24th. The Swiss National Bank will act “with full force” to avoid an appreciation of the Swiss franc against the euro.
Japanese Finance Minister Hirohisa Fujii said that his government has no plans to discuss the JPY's recent increase at a G7 finance leaders' meeting schedule to begin in Istanbul, Turkey on Saturday. The JPY reached an eight-month high against the USD this week after Fujii repeatedly said he did not believe the JPY's gains were abnormal and that a strong Japanese currency could increase domestic demand.
The USD will definitely be discussed at this weekend’s G7 session in Turkey. Eurogroup chairman Jean-Claude Juncker said he believes that the euro zone would like to see a strong U.S. dollar, as well as hear from the U.S. that a strong dollar is also in the interest of the Obama government. Treasury Secretary Tim Geithner will be traveling to Istanbul to attend the G7 finance ministers’ summit.
Former Fed Chairman Alan Greenspan expects the U.S. economy to slow next year as the advance in stocks ends. Greenspan said he expects the economy to grow at a 3 percent to 4 percent annual pace in the next sixth months before slowing, but he doesn’t expect it to revert back to recession in 2010. He also sees the unemployment rate falling from the most recent 9.7 percent.
On the U.S. economic calendar to begin the fourth quarter watch for the August Personal Income and Spending report, Initial Jobless Claims for the week of September 26th, Construction Spending for August, September’s ISM Index, Pending Home Sales for August and Auto and Truck Sales for September.
Earnings scheduled for today include Constellation Brands, Accenture, Immucor, Smart Modular Technologies, CRA International and DemandTec Inc.
Happy Trading,
James Dicks
The IMF also said that the USD’s allocation of world currency reserves fell in the second quarter to the lowest level since the euro was introduced in 1999. The USD’s share fell to 62.8 percent in the quarter ended June 30th, from 65 percent the prior quarter. The USD also lost some ground after Fed Vice Chairman Donald Kohn repeated that the current low interest rates in the U.S. would remain for some months to come.
The USD was lower against major currency rivals yesterday after a pair of reports showed continuing U.S. job losses this month but a less-severe fall in second-quarter activity. The ADP employment report showed private-sector firms dropping 254,000 jobs in September, the fewest positions lost since July 2008. The Commerce Department revised its forecast of real U.S. second-quarter gross domestic product higher; GDP fell 0.7% on an annualized basis, compared to an earlier estimate of a 1% drop. Finally, the Chicago PMI showed an unexpected decline; dropping to 46.1 for September, down from August's reading of 50.0.
The EUR increased against the USD after the European Central Bank (ECB) said it would lend banks 75.2 billion euros for 12 months at the current benchmark interest rate of one percent to improve credit flow and help the economic recovery in the euro-region.
The GBP increased 0.9 percent against the USD, and strengthened for a third day against the EUR after the U.K. consumer confidence report. The AUD gained 1.4 percent against the USD on better-than-expected retail sales. The Australian retail sales report came in at 0.9% versus the 0.6% projected while building permits increased by 3.1%. As a result, the AUD reached a 13 month high with little or no resistance in its way. The NZD extended gains after reports showed New Zealand business confidence climbed this month.
The CHF fell the most in three months against the EUR amid speculation the central bank sold the currency to curb its advance. The franc dropped as much as 0.8 percent, the most since June 24th. The Swiss National Bank will act “with full force” to avoid an appreciation of the Swiss franc against the euro.
Japanese Finance Minister Hirohisa Fujii said that his government has no plans to discuss the JPY's recent increase at a G7 finance leaders' meeting schedule to begin in Istanbul, Turkey on Saturday. The JPY reached an eight-month high against the USD this week after Fujii repeatedly said he did not believe the JPY's gains were abnormal and that a strong Japanese currency could increase domestic demand.
The USD will definitely be discussed at this weekend’s G7 session in Turkey. Eurogroup chairman Jean-Claude Juncker said he believes that the euro zone would like to see a strong U.S. dollar, as well as hear from the U.S. that a strong dollar is also in the interest of the Obama government. Treasury Secretary Tim Geithner will be traveling to Istanbul to attend the G7 finance ministers’ summit.
Former Fed Chairman Alan Greenspan expects the U.S. economy to slow next year as the advance in stocks ends. Greenspan said he expects the economy to grow at a 3 percent to 4 percent annual pace in the next sixth months before slowing, but he doesn’t expect it to revert back to recession in 2010. He also sees the unemployment rate falling from the most recent 9.7 percent.
On the U.S. economic calendar to begin the fourth quarter watch for the August Personal Income and Spending report, Initial Jobless Claims for the week of September 26th, Construction Spending for August, September’s ISM Index, Pending Home Sales for August and Auto and Truck Sales for September.
Earnings scheduled for today include Constellation Brands, Accenture, Immucor, Smart Modular Technologies, CRA International and DemandTec Inc.
Happy Trading,
James Dicks
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