The Forex Daily Digest – September 8, 2009

According to the United Nations, the USD’s role in international trade should be reduced by establishing a new currency to protect emerging markets from the “confidence game” of financial speculation. The Geneva-based U.N. Conference on Trade and Development said in a report that U.N. countries should agree on the creation of a global reserve bank to issue the currency and to monitor the national exchange rates of its members. China, India, Brazil and Russia called for a replacement to the dollar as the main reserve currency after the financial crisis sparked by the collapse of the U.S. mortgage market led to the worst global recession since World War II.

The JPY fell to the lowest level in almost a week against the EUR as stocks rose around the world after the Group of 20 nations agreed to shore up the global economy, reducing demand for the Japanese currency as a refuge. The JPY dropped the most against the CAD and NZD as a report showed German factory orders expanded in July by more than economists forecast.

The AUD traded near a one-year high before retail sales and employment data this week that may intensify speculation the central bank will raise rates as early as October. Consumer spending in Australia probably grew for the fourth month in five and the unemployment rate rose to less than the government’s second-quarter forecast made in May.

Former Fed Chairman Alan Greenspan said that U.S. banks should hold larger amounts of capital than is currently the case. Speaking to a gathering in Mumbai, India, via satellite he said he thinks “even in non-euphoria, non-crisis times, we need to have a larger buffer than we currently have.

Meantime, finance ministers and central bankers from the Group of 20 industrialized and developing nations called for banks to hold “more and better quality capital” once a global economic recovery takes hold. The G20 also agreed to deliver the remainder of a $5 trillion global fiscal stimulus package while outlining a compromise on efforts to control pay for bankers and strengthen oversight of the financial sector.

High ranking central bankers said yesterday that new global rules for bank oversight should help relieve the “boom-and-bust” cycles and prevent the build-up of asset bubbles. European Central Bank President Jean-Claude Trichet said the outlook had improved but policymakers could not afford to be satisfied with the status quo and would push reforms to strengthen the financial system.

The week’s U.S. economic calendar starts slowly. There’s only one major report scheduled for release today. Look for the U.S. Consumer Credit report for July out at 2 pm (Eastern Time). And in earnings expect Pep Boys, Casey's General Stores, and Smithfield Foods.

Have a profitable week and happy trading,

James Dicks