US Dollar
The global rally in stock markets waned yesterday as major European and US indices declined. In the US the most representative S&P 500 index lost 2% after reports showed that the nation's consumer confidence unexpectedly dropped and home prices declined: the consumer sentiment index fell in October to 39.8, the lowest since March 2009, while economists predicted a softer drop from 46.4 to 46. At the same time the S&P/Case-Shiller home price index, calculated for 20 US cities, fell in August by 3.8% in annual figures. Both unfavorable reports have dramatically increased investor's risk aversion, giving support to the well-known refuge assets. The yield for 10-year Treasury notes dived from 2.23% to 2.11%, while
gold prices rocketed to a one-month high above 1700 dollars per troy ounce. The dollar gained some ground yesterday against the Canadian, Australian peers and the euro, but was weaker against the Japanese yen and the Swiss frank, so that the weighted dollar index remained almost unchanged at 76.12.
Euro
Despite the euro fell against the dollar yesterday, it is still being traded above 1.39, close to a seven week high. The single currency is still supported by expectations that European leaders must “deliver on the commitments they’ve made,” as the US Treasury Secretary Timothy Geithner said yesterday. Today the leaders will continue discussions of the complex rescue program. “We’re currently debating 50% to 60% in Europe,” Luxembourg Prime Minister Juncker said in an interview yesterday about the level of possible Greek debt write off. “We’ll have parallel talks in Brussels with banks and we’ll need to see what’s the result of a voluntary participation.” All in all the euro did not fall in a sell off even when investors realized that the meeting of European financial officials that was scheduled to take place today before the leaders’ summit was cancelled. The single currency traded this morning in a narrow range against the dollar 1.3892-1.3935.
Australian Dollar
The Aussie was one of the worst performers in Asian trading hours today. The currency fell under pressure after reports revealed that inflation slowed last quarter to the weakest pace in 14 years, boosting expectations that the central bank may cut borrowing costs. The consumer price index advanced by 0.6% in the third quarter, while the annual growth pace decreased to 3.5% from 3.6%. Other core indices, which the central bank measures, rose even less than economists expected. After touching on Monday a seven-week high against the US counterpart 1.0500, the Australian dollar fell today to 1.0354.
Canadian Dollar
The Loonie, as the currency is nicknamed, in its turn was one of the worst performers yesterday. The Canadian currency depreciated after the Bank of Canada cut its growth outlook for the economy. The projected growth rate for the current year was reduced to 2.1% from 2.8% predicted in July, as weak US growth and a “brief” European recession hurt confidence and reduce export demand, the central bank said after keeping its policy rate at 1%. At the same time the bank forecasts that inflation will decline as well, falling to as low as 1% in 2012. Pair USD/CAD rocketed yesterday from a five-week low 0.9989 to 1.0211, staying at 1.0138-1.0175 during the Asian trading session.
Japanese Yen
The yen achieved yesterday another record high against the greenback after Europe’s debt turmoil and US unfavorable data spurred demand for refuge. The pair USD/JPY dropped to 75.73 before recovering slightly, but today it was mainly traded below the level 76.00, forcing the Japanese Finance Minister Jun Azumi to say that financial authorities are ready to take “decisive” measures to stem the currency’s appreciation. “We will not rule out any possible measure in dealing with this,” he said and added “I've just instructed the ministry staffers again to make preparations so that we can act in response to anything.”
