The Forex Daily Digest – January 7, 2010
The USD traded higher against most major rivals this morning, helped by remarks from Japan's new finance minister indicating a desire for a weaker JPY. Reluctance by traders to make big bets ahead of the release of December U.S. employment data last week helped relieve pressure on the dollar, after minutes of the last Federal Reserve meeting showed policy makers continue to expect a slow recovery with little threat of inflation pressure.
Japanese Finance Minister Naoto Kan said that many Japanese companies favor the USD trading around 95 yen and that he will work with the Bank of Japan to get the currency to "appropriate" levels.
Meantime, the USD fell to the lowest level in three weeks against the EUR on the assumption the Federal Reserve will keep interest rates low and after Australian retail sales grew more than forecast. The dollar dropped to an 11-week low against the CAD after minutes of the Federal Reserve’s December meeting showed policy makers considered the possibility of extending their stimulus measures.
The Bank of England committed to one more month of asset purchases under its 200 billion pound ($318 billion) quantitative easing policy today, as expected, and kept interest rates at a record-low 0.5 percent. The central bank had previously indicated that the decision on the future of its asset-buying program would take place next month. It will then have updated growth and inflation forecasts, as well as fourth-quarter GDP data which is expected to have confirmed that Britain's economy is out of recession.
China's central bank surprised markets today by raising the interest rate on its three-month bills for the first time since August, increasing its hold on liquidity a day after it promised to keep credit growth in check. While analysts said the move was just a withdrawal of surplus cash in the system, markets feared the worst, taking it as a sign the central bank might be getting ready to use more dynamic actions to calm expansion and fight inflation, such as raising benchmark lending rates. The move was accompanied by the biggest weekly net drain from money markets in 11 weeks.
South Africa’s rand weakened against the USD as prices for gold and platinum, the country’s largest exports, declined. The rand advanced 28 percent last year, the second-best performer of 26 emerging-market currencies after Brazil’s real, as near-zero interest rates in the U.S. encouraged investors to borrow in dollars and buy in countries with higher returns. South Africa’s main interest rate of 7 percent compares with 0.25 percent in the U.S.
The number of people claiming unemployment benefits for the first time barely rose last week, after two weeks of sharp drops. But the four-week average of claims, which evens out fluctuations, fell for the 18th straight week to 450,250. That figure is nearing the roughly 425,000 that many economists say would be a sign the economy will start creating jobs.
On the economic calendar, Nonfarm Payrolls, Average Workweek, Unemployment Rate, Wholesale Inventories, and Consumer Credit. On Monday, the fourth quarter earnings season begins when Alcoa releases its earnings after the closing bell.
Happy trading,
James Dicks
Japanese Finance Minister Naoto Kan said that many Japanese companies favor the USD trading around 95 yen and that he will work with the Bank of Japan to get the currency to "appropriate" levels.
Meantime, the USD fell to the lowest level in three weeks against the EUR on the assumption the Federal Reserve will keep interest rates low and after Australian retail sales grew more than forecast. The dollar dropped to an 11-week low against the CAD after minutes of the Federal Reserve’s December meeting showed policy makers considered the possibility of extending their stimulus measures.
The Bank of England committed to one more month of asset purchases under its 200 billion pound ($318 billion) quantitative easing policy today, as expected, and kept interest rates at a record-low 0.5 percent. The central bank had previously indicated that the decision on the future of its asset-buying program would take place next month. It will then have updated growth and inflation forecasts, as well as fourth-quarter GDP data which is expected to have confirmed that Britain's economy is out of recession.
China's central bank surprised markets today by raising the interest rate on its three-month bills for the first time since August, increasing its hold on liquidity a day after it promised to keep credit growth in check. While analysts said the move was just a withdrawal of surplus cash in the system, markets feared the worst, taking it as a sign the central bank might be getting ready to use more dynamic actions to calm expansion and fight inflation, such as raising benchmark lending rates. The move was accompanied by the biggest weekly net drain from money markets in 11 weeks.
South Africa’s rand weakened against the USD as prices for gold and platinum, the country’s largest exports, declined. The rand advanced 28 percent last year, the second-best performer of 26 emerging-market currencies after Brazil’s real, as near-zero interest rates in the U.S. encouraged investors to borrow in dollars and buy in countries with higher returns. South Africa’s main interest rate of 7 percent compares with 0.25 percent in the U.S.
The number of people claiming unemployment benefits for the first time barely rose last week, after two weeks of sharp drops. But the four-week average of claims, which evens out fluctuations, fell for the 18th straight week to 450,250. That figure is nearing the roughly 425,000 that many economists say would be a sign the economy will start creating jobs.
On the economic calendar, Nonfarm Payrolls, Average Workweek, Unemployment Rate, Wholesale Inventories, and Consumer Credit. On Monday, the fourth quarter earnings season begins when Alcoa releases its earnings after the closing bell.
Happy trading,
James Dicks
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