The Forex Daily Digest – October 29, 2009
The USD extended its gains after economic data showed that orders for U.S.-made durable goods rose 1% in September. Data also showed U.S. new home sales fell in September. The report showed sales of newly-built home declined unexpectedly last month, falling at an annual rate of 3.6 percent to 402,000. The dollar had advanced earlier against all its major rivals except the JPY, as falling global equity markets led investors to seek safety in the dollar and cut exposure to assets perceived as risky.
The USD remains highly correlated to the stock market, rising when the market falls and falling when stocks rise. Stocks were down across Asia and Europe, driving the dollar rally. The USD's course recently has been a back and forth between investors unleashing dollars to bet on riskier assets such as emerging market stocks and commodities, and then bringing that money back into dollars in fear that the global economic rebound will be weaker than hoped.
The EUR fell against the USD after the U.S. durable goods and housing numbers were released. The EUR declined to new multi-day lows against the CHF and the JPY, driven by a fall in stock prices. The EUR also edged down against the USD and the GBP.
Bank of Canada Governor Mark Carney said the rise in the CAD against the USD will slow inflation and economic growth, and reiterated he has tools to slow its appreciation if needed. Carney said the current commitment to keep the bank’s key interest rate at 0.25 percent through June 2010 unless inflation shifts should work to bring consumer prices back to policy makers’ 2 percent target. The CAD fell against the USD to the lowest level in more than three weeks as declines in oil, the nation’s largest export, and global stocks damped demand for higher-yielding assets.
The AUD and NZD fell as Asian stocks fell for a second straight day, quelling demand for higher-yielding assets. The AUD fell to a two-week low as inflation cooled to the slowest pace in 10 years, prompting speculation the central bank may temper the pace of interest rate increases when it meets Nov. 3rd. Annual consumer price inflation in Australia slowed to 1.3 percent in the third quarter, the smallest gain since the second quarter of 1999, from 1.5 percent in the previous there months. The NZD dropped for a fifth day before its central bank meeting tomorrow where policy makers may hold rates at a record low.
The JPY gained broadly as deepening share losses prompted traders to dump currencies perceived to be higher risk for the low-yielding Japanese currency. Japan's senior vice minister for the economy said the Japanese government wants the Bank of Japan to support the economy via monetary policy.
During the past year, China has signed 650 billion yuan (US$95 billion) in currency-swap agreements with Indonesia, Malaysia, South Korea, Hong Kong, Argentina and Belarus, to promote greater circulation and convertibility of the Chinese yuan. An article by People's Bank of China governor, which called for an international reserve currency to take the place of the US dollar, created a whirlwind of debate within China's policy circles, and the international community, about the future role of the yuan.
The CEO of JPMorgan Chase defended the U.S. dollar at a securities industry conference this week. Jamie Dimon discussed the dollar as part of the Securities Industry and Financial Markets Association (SIFMA) annual meeting held in New York. He said the USD needs two things to remain strong: the U.S. economy must grow and, equally as important, the government must begin to demonstrate fiscal responsibility. Dimon said the fate of the dollar is not about "the deficit over the next year or two," but about proving that the country's long-term plan is to rein in spending and reduce the nation's debt over time.
On the U.S. economic calendar today, the advanced Q3 Gross Domestic Product and Chain Deflator results and the Initial Jobless Claims report for the week of October 24th. Some of the major companies scheduled to report earnings today include ExxonMobil, Procter & Gamble, Aetna, Barrick Gold, Chicago Mercantile Exchange, Eastman Kodak, Motorola, Australia and New Zealand Banking Group Ltd, Colgate-Palmolive, Global Crossing, MetLife, OfficeMax, and SBA Communications.
Happy Trading,
James Dicks
The USD remains highly correlated to the stock market, rising when the market falls and falling when stocks rise. Stocks were down across Asia and Europe, driving the dollar rally. The USD's course recently has been a back and forth between investors unleashing dollars to bet on riskier assets such as emerging market stocks and commodities, and then bringing that money back into dollars in fear that the global economic rebound will be weaker than hoped.
The EUR fell against the USD after the U.S. durable goods and housing numbers were released. The EUR declined to new multi-day lows against the CHF and the JPY, driven by a fall in stock prices. The EUR also edged down against the USD and the GBP.
Bank of Canada Governor Mark Carney said the rise in the CAD against the USD will slow inflation and economic growth, and reiterated he has tools to slow its appreciation if needed. Carney said the current commitment to keep the bank’s key interest rate at 0.25 percent through June 2010 unless inflation shifts should work to bring consumer prices back to policy makers’ 2 percent target. The CAD fell against the USD to the lowest level in more than three weeks as declines in oil, the nation’s largest export, and global stocks damped demand for higher-yielding assets.
The AUD and NZD fell as Asian stocks fell for a second straight day, quelling demand for higher-yielding assets. The AUD fell to a two-week low as inflation cooled to the slowest pace in 10 years, prompting speculation the central bank may temper the pace of interest rate increases when it meets Nov. 3rd. Annual consumer price inflation in Australia slowed to 1.3 percent in the third quarter, the smallest gain since the second quarter of 1999, from 1.5 percent in the previous there months. The NZD dropped for a fifth day before its central bank meeting tomorrow where policy makers may hold rates at a record low.
The JPY gained broadly as deepening share losses prompted traders to dump currencies perceived to be higher risk for the low-yielding Japanese currency. Japan's senior vice minister for the economy said the Japanese government wants the Bank of Japan to support the economy via monetary policy.
During the past year, China has signed 650 billion yuan (US$95 billion) in currency-swap agreements with Indonesia, Malaysia, South Korea, Hong Kong, Argentina and Belarus, to promote greater circulation and convertibility of the Chinese yuan. An article by People's Bank of China governor, which called for an international reserve currency to take the place of the US dollar, created a whirlwind of debate within China's policy circles, and the international community, about the future role of the yuan.
The CEO of JPMorgan Chase defended the U.S. dollar at a securities industry conference this week. Jamie Dimon discussed the dollar as part of the Securities Industry and Financial Markets Association (SIFMA) annual meeting held in New York. He said the USD needs two things to remain strong: the U.S. economy must grow and, equally as important, the government must begin to demonstrate fiscal responsibility. Dimon said the fate of the dollar is not about "the deficit over the next year or two," but about proving that the country's long-term plan is to rein in spending and reduce the nation's debt over time.
On the U.S. economic calendar today, the advanced Q3 Gross Domestic Product and Chain Deflator results and the Initial Jobless Claims report for the week of October 24th. Some of the major companies scheduled to report earnings today include ExxonMobil, Procter & Gamble, Aetna, Barrick Gold, Chicago Mercantile Exchange, Eastman Kodak, Motorola, Australia and New Zealand Banking Group Ltd, Colgate-Palmolive, Global Crossing, MetLife, OfficeMax, and SBA Communications.
Happy Trading,
James Dicks
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