The FOREX Daily Digest – November 25, 2009

The USD lost ground against major pairs, which allowed the EUR to again obtain more than $1.50 as overall economic sentiment rebounded and the U.S. Federal Reserve showed no misgivings about the U.S. dollar’s decline. The broadly weaker USD also broke parity with the Swiss franc for the first time since July 2008. Gold climbed to a record in London and New York on a further drop by the USD and on a report that India may buy more bullion for its central-bank reserves.

China's foreign-exchange regulator tightened rules on individuals making cross-border money transfers, increasing efforts to control inflows of funds on speculation that the yuan is undervalued. Under the new rules, individuals are limited in the number of transfers they can make from overseas to onshore Chinese accounts. An individual now cannot transfer foreign currencies to five or more onshore accounts in a single day. The restrictions will also apply to transfers made to multiple accounts made on consecutive days.

Also in currency news from Asia today, Vietnam's central bank devalued its currency and raised interest rates, moves that were seen as required relieving pressure on the currency and protecting the nation's foreign reserves. The State Bank of Vietnam devalued the currency by 5.4%, effective tomorrow.

The AUD rose and commodities gained on evidence economies are rebounding from the first global recession since World War II. Stocks advanced, while returns on emerging-market bonds climbed to the highest level in at least 16 years. And the CAD weakened versus the USD as crude oil, the nation’s largest export, and global equities dropped, losing the appeal of currencies tied to growth.

ECB President Jean-Claude Trichet said the European Central Bank has been able to prevent deflation in Europe due to its 'solid anchoring' of expectations on price stability. Trichet also said that economic improvement has not been rapid, when considering unemployment data.

Japan's life insurers are planning to hold foreign bond holdings hedged against currency volatility for the rest of the financial year after their first-half investment income was hurt by a stronger JPY against the USD. Japan's top insurers held in the order of $1.6 trillion of assets as of March and 9.5 percent of that was invested in foreign bonds such as U.S. Treasuries, UK gilts and Euro zone government bonds.

Tomorrow is Thanksgiving in the United States and there are no major economic reports or earnings scheduled. We hope you have a peaceful and safe holiday.

Happy Thanksgiving,

James Dicks