The Forex Daily Digest – October 16, 2009
The dollar headed lower against the EUR and the GBP but remained up against the JPY in volatile trading after a mixed bag of U.S. economic data. Currency markets also watched the U.S. equities market, which remained above the 10,000 level for a second straight day. After a weak regional manufacturing report, stocks remained lower and U.S. Treasuries briefly turned positive, pushing yields down, indicating a demand for safer assets that briefly supported the U.S. dollar.
The dollar index headed lower after it was reported that manufacturing activity in the Philadelphia Federal Reserve region increased but at a weaker than expected pace in October. The Philly Fed Index fell to 11.5 this month after a 14.1 showing in September.
European Central Bank President Jean-Claude Trichet vocalized support for the dollar again. The GBP rose the most in more than eight months against the EUR after news reports that Bank of England Markets Director Paul Fisher said policy makers would be more likely to suspend asset purchases.
Speaking to a banking convention in Frankfurt, Trichet also said that a slow and deliberate economic recovery is likely and the ECB will phase out non-standard measures as the situation normalizes. The ECB left its key lending rate unchanged at a record low of 1% last week. Trichet says it's still premature to declare the financial crisis to be over, but when the time is right there shouldn't be any concerns about the ECB's ability to exit. Economists say they expect the euro-zone economy to return to growth in the third quarter.
Former Federal Reserve Chairman Alan Greenspan said that he isn’t too concerned about the latest bout of selling the U.S. dollar. But he said that, longer term, government budget deficits would probably be even bigger than current record estimates. He added that the deficits would continue to put downward pressure on the USD and upward pressure on borrowing costs.
The U.S. Treasury Department said in its latest report on foreign-exchange trading that China's foreign-exchange policy risks "unwinding" some of the improvements made in lessening international trade imbalances during the current global financial crisis. But Treasury repeated an earlier finding that China was not manipulating its currency. The lack of a finding of manipulation is important because under the legislation prompting the review, a discovery of manipulation would set off a sequence of steps that could result in the U.S. imposing duties on imports from China.
Japanese Finance Minister Hirohisa Fujii defended his right to speak out on currencies on while dismissing the view that he favors a stronger yen. The JPY was up versus the USD last month after Fujii, on the day he became minister, said a strong yen had advantages for Japan's economy and he opposed interference in the market if currency moves were gradual.
The chief strategist at Sumitomo Mitsui Banking Corp. said the USD may drop to 50 JPY in 2010 and will ultimately lose its position as the global reserve currency, citing trading patterns and a likely double dip in the U.S. economy. Last week the dollar dropped to the lowest in almost a year against the JPY as record U.S. government borrowings and interest rates near zero sapped demand for the U.S. currency.
Options traders are increasing their bets that the CAD will trade on a one-to-one basis with the USD for the first time in more than a year on a quicker economic recovery and surging prices of commodities. The CAD, which was last at C$1 per U.S. dollar in July 2008, currency analysts believe there’s a high likelihood the CAD will reach parity with the USD by the end of the year.
The AUD may break parity with the USD next year as the nation’s interest rate premium widens with the central bank increasing rates amid accelerating economic growth. The chief economist at St. George Bank will “not rule out the Australian dollar breaching parity.” Interest-rate expectations are an increasingly dominant driver of the AUD.
On the economic calendar today, you can expect TIC data for August, Capacity Utilization and Industrial Production for September, as well as the preliminary Michigan Consumer Sentiment report for October. Earnings on Friday will include General Electric, Bank of America, Halliburton Company, Mattel, and A.O. Smith Corp.
Happy trading,
James Dicks
The dollar index headed lower after it was reported that manufacturing activity in the Philadelphia Federal Reserve region increased but at a weaker than expected pace in October. The Philly Fed Index fell to 11.5 this month after a 14.1 showing in September.
European Central Bank President Jean-Claude Trichet vocalized support for the dollar again. The GBP rose the most in more than eight months against the EUR after news reports that Bank of England Markets Director Paul Fisher said policy makers would be more likely to suspend asset purchases.
Speaking to a banking convention in Frankfurt, Trichet also said that a slow and deliberate economic recovery is likely and the ECB will phase out non-standard measures as the situation normalizes. The ECB left its key lending rate unchanged at a record low of 1% last week. Trichet says it's still premature to declare the financial crisis to be over, but when the time is right there shouldn't be any concerns about the ECB's ability to exit. Economists say they expect the euro-zone economy to return to growth in the third quarter.
Former Federal Reserve Chairman Alan Greenspan said that he isn’t too concerned about the latest bout of selling the U.S. dollar. But he said that, longer term, government budget deficits would probably be even bigger than current record estimates. He added that the deficits would continue to put downward pressure on the USD and upward pressure on borrowing costs.
The U.S. Treasury Department said in its latest report on foreign-exchange trading that China's foreign-exchange policy risks "unwinding" some of the improvements made in lessening international trade imbalances during the current global financial crisis. But Treasury repeated an earlier finding that China was not manipulating its currency. The lack of a finding of manipulation is important because under the legislation prompting the review, a discovery of manipulation would set off a sequence of steps that could result in the U.S. imposing duties on imports from China.
Japanese Finance Minister Hirohisa Fujii defended his right to speak out on currencies on while dismissing the view that he favors a stronger yen. The JPY was up versus the USD last month after Fujii, on the day he became minister, said a strong yen had advantages for Japan's economy and he opposed interference in the market if currency moves were gradual.
The chief strategist at Sumitomo Mitsui Banking Corp. said the USD may drop to 50 JPY in 2010 and will ultimately lose its position as the global reserve currency, citing trading patterns and a likely double dip in the U.S. economy. Last week the dollar dropped to the lowest in almost a year against the JPY as record U.S. government borrowings and interest rates near zero sapped demand for the U.S. currency.
Options traders are increasing their bets that the CAD will trade on a one-to-one basis with the USD for the first time in more than a year on a quicker economic recovery and surging prices of commodities. The CAD, which was last at C$1 per U.S. dollar in July 2008, currency analysts believe there’s a high likelihood the CAD will reach parity with the USD by the end of the year.
The AUD may break parity with the USD next year as the nation’s interest rate premium widens with the central bank increasing rates amid accelerating economic growth. The chief economist at St. George Bank will “not rule out the Australian dollar breaching parity.” Interest-rate expectations are an increasingly dominant driver of the AUD.
On the economic calendar today, you can expect TIC data for August, Capacity Utilization and Industrial Production for September, as well as the preliminary Michigan Consumer Sentiment report for October. Earnings on Friday will include General Electric, Bank of America, Halliburton Company, Mattel, and A.O. Smith Corp.
Happy trading,
James Dicks
Views: 1
Comment
© 2024 Created by James Dicks.
Powered by
You need to be a member of JDFN Financial Network to add comments!
Join JDFN Financial Network