The Forex Daily Digest – November 11, 2009
Today is Veterans Day in the United States and a bank holiday. Although the U.S. equities markets are open, the bond markets are closed. Also most city, federal and state courts and offices are closed today in observance of Veterans Day. The Post Office is also closed today.
The USD fell against most major currency rivals except the GBP, facing pressure as traders showed renewed appetite for risk assets and a "carry-trade" strategy centered on selling the dollar. Equity markets were helped as investors showed renewed appetite for risk assets. The dollar edged downward against the JPY in the Asian session earlier after better than anticipated Japanese machinery orders data was released but it edged slightly higher later in the trading day.
U.S. Treasury Secretary Geithner is in Japan and said he strongly believes a strong USD is “very important” for the U.S. but his remarks had little effect on market activity. The GBP, meanwhile, fell against major rivals after the Bank of England and BOE Governor Mervyn King said recent weakness in sterling would continue to aid an export-led rebound. The GBP advanced against the USD after the National Statistics Office said claims for jobless benefits rose by 12,900 in October which is the slowest rate since April of 2008.
Federal Reserve Chairman Bernanke committed to scale down buying of mortgage-backed debt in the first quarter and European Central Bank President Jean-Claude Trichet signaled last week that some long-term financing auctions will end next month. Australia and Norway have started raising interest rates as the global economic slump ends.
Chinese industrial production and trade surplus climbed last month which indicates strengthening in the world’s third largest economy. That will likely increase calls to allow the yuan appreciate. The news came just days before leaders of the Asian-Pacific region meet in Singapore as well as a visit by President Obama to Beijing next week where he is expected to discuss currency policy with the Chinese government.
China sent its clearest signal yet that it was ready to allow yuan appreciation after an 18-month hiatus, saying it would consider major currencies, not just the USD, in guiding the exchange rate. In its third-quarter monetary policy report, the People's Bank of China departed from its well-worn language on maintaining the yuan "basically stable at a reasonable and balanced level." Instead it implied at a possible shift from an effective dollar peg that has been in place since the middle of last year.
The AUD traded near its strongest level since August of 2008 as a result of the Chinese industrial production number. The AUD rose as high as 93.24 cents after better-than-forecast growth in output and retail sales bolstered forecasts China’s economy will expand more than 10 percent this quarter for the first time in more than a year. The NZD fell after central bank Governor Alan Bollard said its “significant” gains are likely to be unsustainable and risk slowing an improvement in the nation’s current-account deficit.
The first U.S. economic reports of the week will be released tomorrow when the Initial Jobless Claims report for the week of November 11 hits the street. The forecast is for 525K after last week’s 512K. Crude Inventories for the week of November 11 will also be release, as well as the Treasury Budget result for October.
On the Thursday earnings calendar, look for Wal-Mart, Walt Disney, Euro Disney SCA, Anheuser-Busch InBev, Blockbuster Inc., Nordstrom, Kohl’s Corp, The Greenbrier Companies, and Vivendi.
Happy Trading,
James Dicks
The USD fell against most major currency rivals except the GBP, facing pressure as traders showed renewed appetite for risk assets and a "carry-trade" strategy centered on selling the dollar. Equity markets were helped as investors showed renewed appetite for risk assets. The dollar edged downward against the JPY in the Asian session earlier after better than anticipated Japanese machinery orders data was released but it edged slightly higher later in the trading day.
U.S. Treasury Secretary Geithner is in Japan and said he strongly believes a strong USD is “very important” for the U.S. but his remarks had little effect on market activity. The GBP, meanwhile, fell against major rivals after the Bank of England and BOE Governor Mervyn King said recent weakness in sterling would continue to aid an export-led rebound. The GBP advanced against the USD after the National Statistics Office said claims for jobless benefits rose by 12,900 in October which is the slowest rate since April of 2008.
Federal Reserve Chairman Bernanke committed to scale down buying of mortgage-backed debt in the first quarter and European Central Bank President Jean-Claude Trichet signaled last week that some long-term financing auctions will end next month. Australia and Norway have started raising interest rates as the global economic slump ends.
Chinese industrial production and trade surplus climbed last month which indicates strengthening in the world’s third largest economy. That will likely increase calls to allow the yuan appreciate. The news came just days before leaders of the Asian-Pacific region meet in Singapore as well as a visit by President Obama to Beijing next week where he is expected to discuss currency policy with the Chinese government.
China sent its clearest signal yet that it was ready to allow yuan appreciation after an 18-month hiatus, saying it would consider major currencies, not just the USD, in guiding the exchange rate. In its third-quarter monetary policy report, the People's Bank of China departed from its well-worn language on maintaining the yuan "basically stable at a reasonable and balanced level." Instead it implied at a possible shift from an effective dollar peg that has been in place since the middle of last year.
The AUD traded near its strongest level since August of 2008 as a result of the Chinese industrial production number. The AUD rose as high as 93.24 cents after better-than-forecast growth in output and retail sales bolstered forecasts China’s economy will expand more than 10 percent this quarter for the first time in more than a year. The NZD fell after central bank Governor Alan Bollard said its “significant” gains are likely to be unsustainable and risk slowing an improvement in the nation’s current-account deficit.
The first U.S. economic reports of the week will be released tomorrow when the Initial Jobless Claims report for the week of November 11 hits the street. The forecast is for 525K after last week’s 512K. Crude Inventories for the week of November 11 will also be release, as well as the Treasury Budget result for October.
On the Thursday earnings calendar, look for Wal-Mart, Walt Disney, Euro Disney SCA, Anheuser-Busch InBev, Blockbuster Inc., Nordstrom, Kohl’s Corp, The Greenbrier Companies, and Vivendi.
Happy Trading,
James Dicks
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