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The Forex Daily Digest – December 2, 2009

The USD held steady near the lowest level in 15 months against the EUR after ADP said U.S. companies cut 169,000 jobs in November, compared to a 203,000 loss the previous month. The dollar held gains against the JPY after Japanese Prime Minister Yukio Hatoyama reportedly said the yen's rise can't be left "as is," thus speculating that policy makers could move to limit gains. Later, a spokesman said Hatoyama wasn't signaling that the government was set to intervene.

The Bank of Japan, in an emergency meeting, injected 10 trillion yen ($115 billion) of liquidity into financial markets through short-term loans. The move put some pressure on the JPY, but did not impress economists who had expected more aggressive action. Some traders said intervention threats and BOJ actions haven't been sufficient to turn the tide of yen strength beyond the short term.

Chinese Premier Wen Jiaboa rejected as “unfair” calls for the yuan to appreciate while European leaders acknowledged that they were unsuccessful in shifting the nation’s posture on its currency. European officials indicated that they were unsuccessful in convincing China to relax controls on the yuan that shelter Chinese exporters from the USD slide and make euro- region goods relatively less competitive. The yuan is, in effect, pegged to the USD.

Gold increased to a record high for a second day in London and New York as investors stepped up purchases to protect their wealth against a slumping dollar. Other precious metals climbed. Bullion has risen 37 percent this year as the dollar has dropped 8.4 percent against a basket of six currencies.

The CAD moved higher, helped as the price of gold hit a record high, in part on expectations of a fresh leg of U.S. dollar weakness. Also, Canada maintained its estimate of a record high 2009-10 budget deficit of C$55.9 billion, and said it would cut the deficit in half in two years by scaling back its economic stimulus plan.

Philadelphia Federal Reserve Bank President Charles Plosser said the Fed must be prepared to raise interest rates if necessary before the jobless rate falls to an "acceptable level", or risk losing its inflation-fighting credibility. He said he has become more confident in the sustainability of the U.S. economic recovery even when government stimulus ends, and stressed the Fed must take a forward-looking approach.

Meantime, Fed Chairman Bernanke is scheduled to speak before Congress on Thursday as he lobbies for a second term in the position. Bernanke testifies before the Senate Banking Committee in an effort to win confirmation to a fresh four-year term as Fed chairman. The panel must approve his nomination prior to sending it to the full Senate for a vote. Bernanke’s term expires on Jan. 31.

On the economic calendar on Thursday you can expect the Initial Jobless Claims report for the week of November 28, Q3 Productivity (Revision), the Q3 Employment Cost Index and the November ISM Services Index.

Earnings scheduled for Thursday release include Marvell Technology Group, Siemens AG, the Canadian Imperial Bank of Commerce, Del Monte Foods, National Bank of Canada, Novell, Toll Brothers, and Toronto Dominion Bank.

Happy trading,

James Dicks

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