The Forex Daily Digest – October 7, 2009
The USD remained lower against most major rivals, weighed down in part by a British newspaper report that Gulf oil producers, in concert with China, Russia, Japan and France are planning to eventually end dollar-based oil pricing. The report in the Independent newspaper was denied by top finance officials, giving the dollar a small, but temporary, lift in early European trading hours.
Oil futures rose above $71 a barrel early yesterday, as the USD fell against major currencies, attracting traders into the energy market. Dollar weakness typically boosts dollar-denominated commodities such as oil because it makes them cheaper for holders of other currencies.
The AUD advanced after the nation's central bank became the first nation in the Group of 20 to increase interest rates. The Aussie changed hands at 88.70 U.S. cents, up from 87.94 cents in late North American trading Monday. It also rebounded against the Japanese currency after falling as low as 78.03 yen earlier in the session. Australia's central bank raised its key cash rate by 25 basis points to 3.25 percent and indicated more to come, saying it was safe to scale back on stimulus now that the worst danger for the economy had passed. Meantime, Japanese government ministers indicated their economy remains too weak for the central bank to begin withdrawing programs to support companies.
The Chinese Finance Ministry said the International Monetary Fund should begin work on a reform agenda to fix "intrinsic defects" in the international monetary system. Earlier this year, Chinese central bank Governor made waves when he suggested that the IMF's special drawing rights, its unit of account based on a basket of currencies, could eventually become a super-sovereign global reserve currency.
Treasury Secretary Tim Geithner called on the International Monetary Fund to provide thorough surveillance to identify new investment bubbles and keep national foreign exchange policies in line with goals to rebalance the global economy. In remarks prepared for delivery to the IMF and World Bank annual meetings in Istanbul, Geithner said the IMF needed to help regulate economic and currency policies among the Group of 20 developed and emerging countries.
Japanese Finance Minister Hirohisa Fujii issued his clearest warning yet that his nation is open to intervening in the currency market even as the G7 declined to criticize the falling dollar. Fujii’s position has shifted since his initial remarks on taking office last month, when he opposed seeking a “weak” yen and selling the currency which last week increased to an eight- month high of 88.24 against the dollar. The increase is threatening the profits of exporters from some major Japanese companies including Canon and Toyota.
Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty said other countries must make more of an attempt to stabilize the world economy after Canada has done its part. Carney said imbalances that world leaders have acknowledged as threats to a global recovery are between countries like the U.S. that run large trade deficits and surplus countries like China. Flaherty said Asian countries must permit their currencies to float more freely. Carney also expressed concern with the level of instability in foreign exchange markets, and warned that Canadian businesses must get accustomed to being pummeled by variations in the value of the USD for “some time.”
On the U.S. economic calendar today look for the Crude Inventories report for the week of October 2nd, the August Consumer Credit report and September’s Treasury Budget numbers.
The third quarter earnings season begins today when Alcoa reports its numbers after the market closes. Other earnings on the calendar today include Acuity Brands, Family Dollar, Monsanto, Costco Wholesale, Wolverine World Wide, and Helen of Troy Ltd.
Happy Trading,
James Dicks
Oil futures rose above $71 a barrel early yesterday, as the USD fell against major currencies, attracting traders into the energy market. Dollar weakness typically boosts dollar-denominated commodities such as oil because it makes them cheaper for holders of other currencies.
The AUD advanced after the nation's central bank became the first nation in the Group of 20 to increase interest rates. The Aussie changed hands at 88.70 U.S. cents, up from 87.94 cents in late North American trading Monday. It also rebounded against the Japanese currency after falling as low as 78.03 yen earlier in the session. Australia's central bank raised its key cash rate by 25 basis points to 3.25 percent and indicated more to come, saying it was safe to scale back on stimulus now that the worst danger for the economy had passed. Meantime, Japanese government ministers indicated their economy remains too weak for the central bank to begin withdrawing programs to support companies.
The Chinese Finance Ministry said the International Monetary Fund should begin work on a reform agenda to fix "intrinsic defects" in the international monetary system. Earlier this year, Chinese central bank Governor made waves when he suggested that the IMF's special drawing rights, its unit of account based on a basket of currencies, could eventually become a super-sovereign global reserve currency.
Treasury Secretary Tim Geithner called on the International Monetary Fund to provide thorough surveillance to identify new investment bubbles and keep national foreign exchange policies in line with goals to rebalance the global economy. In remarks prepared for delivery to the IMF and World Bank annual meetings in Istanbul, Geithner said the IMF needed to help regulate economic and currency policies among the Group of 20 developed and emerging countries.
Japanese Finance Minister Hirohisa Fujii issued his clearest warning yet that his nation is open to intervening in the currency market even as the G7 declined to criticize the falling dollar. Fujii’s position has shifted since his initial remarks on taking office last month, when he opposed seeking a “weak” yen and selling the currency which last week increased to an eight- month high of 88.24 against the dollar. The increase is threatening the profits of exporters from some major Japanese companies including Canon and Toyota.
Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty said other countries must make more of an attempt to stabilize the world economy after Canada has done its part. Carney said imbalances that world leaders have acknowledged as threats to a global recovery are between countries like the U.S. that run large trade deficits and surplus countries like China. Flaherty said Asian countries must permit their currencies to float more freely. Carney also expressed concern with the level of instability in foreign exchange markets, and warned that Canadian businesses must get accustomed to being pummeled by variations in the value of the USD for “some time.”
On the U.S. economic calendar today look for the Crude Inventories report for the week of October 2nd, the August Consumer Credit report and September’s Treasury Budget numbers.
The third quarter earnings season begins today when Alcoa reports its numbers after the market closes. Other earnings on the calendar today include Acuity Brands, Family Dollar, Monsanto, Costco Wholesale, Wolverine World Wide, and Helen of Troy Ltd.
Happy Trading,
James Dicks
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