The Forex Daily Digest – November 19, 2009
The JPY and USD strengthened against the EUR as Asian and European stock markets fell, discouraging demand for higher-yielding assets. The JPY increased against all of its 16 most-traded counterparts as equities weakened. The NZD was headed for the worst performance against the USD in the past month among major currencies as the nation’s main opposition party ended its support for the central bank’s priority of containing inflation. New Zealand’s main opposition Labor Party will no longer support the central bank’s primary policy of targeting inflation, saying it wants a competitive exchange rate and lower borrowing costs.
Gold fell for the first time in five days in London as a stronger USD curbed the metal’s appeal as an alternative investment, spurring sales of bullion after its rally to a record. Gold, which typically moves inversely to the USD, reached an all-time high of $1,152.85 an ounce this week. The metal has climbed 29 percent this year as the U.S. currency has dropped 6.1 percent against the EUR.
Federal Reserve officials downplayed the consequences of the falling USD, emphasizing that deflation is still a threat, especially with commercial real estate prices falling. Dallas Fed President Richard Fisher said that the declining dollar, which fell to a 15-month low against major currencies this week, is only one of the factors the Fed watches when setting policy. Fed Chairman Bernanke surprised investors this week by commenting directly on the USD’s value. He said the focus on the Fed's dual mandate of price stability and jobs growth will help the dollar to be "strong."
China’s yuan forwards dropped, headed for the biggest weekly loss in 11 months, after Chinese officials rejected international calls for the currency to appreciate while exports slump. This week President Obama urged his Chinese counterpart Hu Jintao to make good on a commitment to allow the yuan to appreciate. Hu meanwhile made no mention of the currency’s peg to a weakening dollar in a joint briefing.
Meantime, EU Monetary Affairs Commissioner Joaquin Almunia said that top euro zone officials will urge China to move towards a more flexible exchange rate policy but it will not be easy to introduce change soon. European Central Bank President Jean-Claude Trichet, the chairman of euro zone finance ministers, Jean-Claude Juncker, and Almunia will travel to China at the end of November for talks on exchange rates.
The CAD fell for a third day as a stronger USD pushed higher-yielding assets such as stocks and crude oil lower, softening the appeal of currencies tied to growth. The CAD, 15 percent higher this year, tends to trade in concert with stocks and commodity prices. Canadian bond prices finished flat to lower across the curve given supply concerns, while a slip in the bigger U.S. Treasury markets also weighed on domestic bond prices.
There are no major economic reports scheduled for release on Friday. There are a few earnings reports on the calendar including America’s Car-Mart, J.M. Smucker, Ann Taylor Stores, D.R. Horton, Johnson Outdoors Inc., and Kirkland’s.
Happy trading,
James Dicks
Gold fell for the first time in five days in London as a stronger USD curbed the metal’s appeal as an alternative investment, spurring sales of bullion after its rally to a record. Gold, which typically moves inversely to the USD, reached an all-time high of $1,152.85 an ounce this week. The metal has climbed 29 percent this year as the U.S. currency has dropped 6.1 percent against the EUR.
Federal Reserve officials downplayed the consequences of the falling USD, emphasizing that deflation is still a threat, especially with commercial real estate prices falling. Dallas Fed President Richard Fisher said that the declining dollar, which fell to a 15-month low against major currencies this week, is only one of the factors the Fed watches when setting policy. Fed Chairman Bernanke surprised investors this week by commenting directly on the USD’s value. He said the focus on the Fed's dual mandate of price stability and jobs growth will help the dollar to be "strong."
China’s yuan forwards dropped, headed for the biggest weekly loss in 11 months, after Chinese officials rejected international calls for the currency to appreciate while exports slump. This week President Obama urged his Chinese counterpart Hu Jintao to make good on a commitment to allow the yuan to appreciate. Hu meanwhile made no mention of the currency’s peg to a weakening dollar in a joint briefing.
Meantime, EU Monetary Affairs Commissioner Joaquin Almunia said that top euro zone officials will urge China to move towards a more flexible exchange rate policy but it will not be easy to introduce change soon. European Central Bank President Jean-Claude Trichet, the chairman of euro zone finance ministers, Jean-Claude Juncker, and Almunia will travel to China at the end of November for talks on exchange rates.
The CAD fell for a third day as a stronger USD pushed higher-yielding assets such as stocks and crude oil lower, softening the appeal of currencies tied to growth. The CAD, 15 percent higher this year, tends to trade in concert with stocks and commodity prices. Canadian bond prices finished flat to lower across the curve given supply concerns, while a slip in the bigger U.S. Treasury markets also weighed on domestic bond prices.
There are no major economic reports scheduled for release on Friday. There are a few earnings reports on the calendar including America’s Car-Mart, J.M. Smucker, Ann Taylor Stores, D.R. Horton, Johnson Outdoors Inc., and Kirkland’s.
Happy trading,
James Dicks
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