Forex News (from InstaForex) - page 22
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The euro raced ahead against the dollar Tuesday morning, as Italian Prime Minister Silvio Berlusconi narrowly avoided a vote of no-confidence and German economic sentiment continued to rise.
The Mannheim-based Centre for European Economic Research or ZEW said its economic sentiment indicator for Germany climbed to 4.3 points from November's 1.8 points.
However, the euro fell from its early highs after a flurry of US economic data signaled the nation's recovery may be on a sustainable path.
Traders also re-assessed Berlusconi's slim victory as the sun came up in New York. The 11th hour win for the Italian PM may ensure political stability for a few months, but his ruling coalition has been severely damaged by the close vote.
The euro rose to a 3-week high of $1.3497 against the dollar, but dropped a penny from there amid the release of US data.
Retail sales in the U.S. increased by more than anticipated in the month of November, according to a report released by the Commerce Department on Tuesday, with the data likely to add to recent optimism about the holiday shopping season.
And the Labor Department released a report on Tuesday showing that total producer prices for November increased by more than economists had been expecting.
Boosted by energy costs, producer prices increased by 0.8 percent in November after rising by 0.4 percent in each of the two previous months.
The euro kept its gains versus the sterling after rising to a 2-week high of 0.85.
The single currency also remained firm against the yen, edging just above Y112 to its highest level in about three weeks.
Looking ahead, the Federal Reserve will announce its latest decision on interest rates at 2:15 pm ET. No change in rates is expected, but commentary on the nation's economy will be closely watched.
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During early European deals on Thursday, the euro showed mixed trading against other major currencies.
The euro climbed to more than a 3-week low of 108.55 against the yen in Thursday's early European deals at 4:30 am ET. The euro is now worth 108.65 against the yen, compared to yesterday's close of 109.47. On the downside, 108.4 is seen as the next target level for the euro.
The euro that rose to a 6-day high of 0.8528 against the pound in early European session on Thursday at 3:20 am ET eased thereafter. Currently, the pair is trading near yesterday's close of 0.8516.
After reaching a high of 1.3153 against the dollar at 2:20 am ET Thursday, the euro fell. The euro-dollar pair is now trading near yesterday's close of 1.3109.
The euro soared to 1.2518 against the Swiss franc at 2:40 am ET Thursday. Thereafter, the euro-franc pair fell, but rebounded after touching a low of 1.2459 at 3:20 am ET. The pair is presently worth 1.2510, up from yesterday's close of 1.2472.
Traders are now likely to focus on the New York session, in which the U.S. personal income and spending, durable goods orders, new home sales - all for November, University of Michigan's final report on consumer confidence for December and the weekly jobless claims for the week ended December 18 are slated for release.
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The dollar was mixed Friday morning in New York amid the release of government data showing the US unemployment rate dropped to 9.4 percent despite the creation of few jobs than analysts were expecting.
Modest strength was seen against the euro for a third day, and the buck remained away from multi-decade lows against the Swiss franc and aussie.
The Labor Department said Non-farm payrolls rose 103,000 in December, helping to drive the unemployment rate down to a year and a half low of 9.4 percent.
While the headline number on unemployment should give the Obama administration some breathing room, the Federal Reserve will likely focus on the the fact that only 103,000 jobs were generated.
The Fed is widely expected to support the economy with record low interest rates and asset purchases through the first half of 2011.
The dollar held near $1.2990 versus the euro, a gain of 0.15 percent.
Versus the yen, the dollar slipped very slightly to Y83.29, having seen strength in the last few sessions.
At the same time, the dollar remained firm against the Swiss franc, improving 0.2 percent to CHF 0.9675. The dollar hit a record low near CHF 0.93 earlier this month.
Eurozone economic growth for the third quarter was downgraded due to bleak investment and weaker-than-expected household spending. The performance of the member countries showed marked divergence, with Germany boosting overall Eurozone growth.
According to the latest report from the European Union statistical office Eurostat, gross domestic product grew only 0.3% in the third quarter, instead of previously estimated 0.4%. GDP growth slowed from second quarter's 1%.
German industrial production dropped more than expected in November, reflecting broad-based declines in all industrial groupings.
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In European deals on Friday, the U.S. dollar recouped some of its early losses against the currencies of Europe, Japan and Switzerland. The dollar thus recovered from a 1-month low against the euro, 1-week low against the franc and a 9-day low against the yen.
As of now, the dollar is worth 82.85 against the yen, 1.3360 against the euro and 0.9651 against the franc.
In a surprise move, the People's Bank of China today raised banks' reserve requirement ratio by 50 basis points.
It was the seventh such rate hike since 2010. The last hike was on December 10. The central bank said new rates will be effective from January 20.
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The euro held its recent gains against other major currencies on Thursday amid mounting evidence that the monetary union will survive a prolonged sovereign debt crisis.
It appears for now that Spain and Portugal will not join Greece and Ireland in accepting debt relief from neighbors and the International Monetary Fund.
The Iberians conducted successful bond auctions earlier this week, allowing central bankers to turn attention to fighting inflation in the euro zone.
The European Central Bank acknowledged inflationary pressures in Tuesday's interest rate setting announcement.
While US policy makers are expected to maintain accommodative monetary policy in 2011, the inflation fighters at the ECB will likely tighten if prices continue to rise above their 2 percent target.
In economic news from the region, Germany's Federal Ministry of Economics and Technology raised its 2011 growth forecast. The ministry now sees 2.3% expansion for Germany this year, faster than the 1.8% growth it had predicted in October.
Extending this week's strong gains, the euro rose to $1.3537 against the dollar -- its highest level since late November.
From the US, a Commerce Department report showed a steeper than expected drop in housing starts in the month of December, However, the report also showed a much bigger than expected increase in building permits.
The euro touched a monthly peak of Y115.15 versus the yen on Tuesday, and was little changed from that mark today.
The single currency also continued its comeback bid against the Swiss franc, reaching a 5-week high of CHF 1.2996. The euro touched a record low of CHF 1.24 earlier in January.
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Standard & Poor's downgraded Japan's sovereign credit rating on Thursday, citing the country's soaring mountain of debt.
The agency said Japan's debt dynamics were under pressure from various factors and that the debt ratio is likely to rise further than previously envisaged.
The move took currency markets by surprise and the yen plunged to a six-day low of 83.09 against the dollar.
The credit rating was cut to AA- from AA, with the outlook on the rating seen as "stable."
Japan has the highest public debt ratio in the industrialized world, with its gross debt levels approaching 200% of gross domestic product.
This precarious fiscal position was being further undermined by persistent falling prices, a rapidly aging population, and a lack of coherent government strategy to tackle the issue, the S&P said.
The S&P forecast only a modest improvement in Japan's finances in the near-term. The fiscal deficit was seen falling from an estimated 9.1% of GDP in the current fiscal year to 8% in the 2013 financial year.
"In the medium-term, we do not forecast the government achieving a primary balance before 2020 unless a significant fiscal consolidation program is implemented beforehand," the S&P said.
It criticized Prime Minister Naoto Kan's coalition government for lacking a "coherent strategy" to address the problem, and said it did not expect any material development to emerge from the reviews of the nation's social security and tax systems this year.
Social security payments alone account for nearly a third of the Japanese government's record $1.1 trillion budget for the 2011 financial year and the agency expects this to swell further as the population ages and the labor force shrinks.
"The reasons for the downgrade are a timely reminder of the huge economic and financial challenges facing the Japanese government, which may simply not be up to the job," Julian Jessop, chief analyst at Capital Economics said.
Japan has been suffering from falling exports, a strong yen and almost two years of falling prices.
The country's economy grew 4.5% on an annualized basis between July and September of last year.
However, analysts said the relatively strong growth rate was due to one-off factors such as green car subsidies, and the economy is expected to lose momentum in the final three months of 2010.
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During early European deals on Friday, the euro showed choppy trading against the currencies of U.S., Japan and Switzerland after falling yesterday on ECB President Jean-Claude Trichet's comments.
Trichet said inflation rates could temporarily increase further in eurozone and are likely to stay slightly above 2% for most of 2011, before moderating again around the turn of the year.
The European Central Bank retained its key interest for the 21th consecutive month yesterday as the euro area battles rising inflationary pressures amid the resurfacing of the debt crisis in peripheral economies.
At the Governing Council meeting, the Frankfurt-based central bank led by President Jean-Claude Trichet left the key interest rate unchanged at a record low 1%. The decision was in line with economists' expectations.
As of now, the euro is worth 1.3642 against the dollar, 111.25 against the yen and 1.2910 against the franc, compared to yesterday's close of 1.3636, 111.37 and 1.2894, respectively.
Against the pound, the euro moved sideways in Asian deals, but it declined to a 15-day low of 0.8425 at 3:15 am ET as the pound rose on U.K.'s Halifax house price report. However, the euro rebounded soon and the pair is currently trading near yesterday's close of 0.8452.
Average house prices in the UK rose a seasonally adjusted 0.8% month-on-month in January to GBP 164,173, Halifax said. That was in contrast to analyst expectations for a 0.2% fall. During the three months to January, prices fell 0.7% compared to the preceding three months.
Unemployment reports from the U.S. and Canada for the month of January are expected to influence trading in the upcoming hours.
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Ahead of the release of the U.K. industrial production report for December at 4:30 am ET Thursday, the pound showed mixed trading against its major counterparts. While the pound gained against the euro, it fell versus the dollar, yen and the franc. At 4:25 am ET, the pound traded at 1.6045 against the dollar, 0.8492 against the euro, 132.80 against the yen and 1.5449 against the franc.
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The dollar fell further versus other major currencies on Friday, as popular unrest among strategic U.S. allies has fueled concerns about the nation's role in the Middle East.
Just one week after civil demonstrations toppled Hosni Mubarak in Egypt, the leadership in Bahrain fired on unarmed protesters in an effort to quell the uprising there.
Meanwhile, Federal Reserve Chairman Ben Bernanke was not backing away from the central bank's commitment to support the economy with massive bond purchases.
Speaking to finance ministers in France, Bernanke said emerging nations have benefited from the easy monetary policy adopted by developed economies.
He urged China to let its currency float in the open market, and to focus on improving domestic demand rather than rely on the U.S. consumer for growth.
Earlier in the day, China raised the reserve requirements for its banks, hoping to contain inflation in the world's most robust major economy.
Meanwhile, consumer prices leveled off a bit in Canada last month.
Stripping out volatile energy prices, Canada's Consumer Price Index (CPI) rose a tame 1.7 percent in the 12 months to January, identical to the increase in December.
The Bank of Canada's closely-watched core index advanced 1.4 percent annually in January, following a 1.5 percent rise in December.
Still, with commodity prices on the rise, the dollar hovered near this week's 2-year low of C$0.9814 versus the resource-linked loonie.
Versus the euro, the dollar dropped a penny to a nearly 2-week low of $1.3675.
The buck pulled back from a monthly high against the yen, slipping to Y83.13.
Members of the Japanese central bank's policy board felt more confident of the economic recovery last month amid signs of a rebound in exports, meeting notes of the January policy meeting showed.
Bank of Japan policymakers also felt the negative effects of the removal of government subsidies would wane, lifting the economy to "a moderate recovery path."
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Following the release of Canada's industrial product price and raw materials price indexes-both for January at 8:30 am ET, the Canadian dollar remained stronger against its major counterparts. The loonie is presently trading at 0.9722 against the US dollar, 1.3442 against the euro and 84.31 versus the yen.
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