| Current | Yesterday | ||
| USD | 0.17813 | 0.17813 | |
| GBP | 0.50313 | 0.50313 | |
| EUR | 0.31375 | 0.31375 | |
| JPY | 0.11625 | 0.11625 | |
| CHF | 0.05417 | 0.05417 | |
| AUD | 3.97500 | 3.86750 | |
| CAD | 0.23917 | 0.23917 | |
| NZD | 2.70500 | 2.69750 |
The dollar gained on other majors immediately after the Federal Reserve came out with its latest interest rate decision, paring its early losses to test its recent 10-week high versus the euro.
The Fed kept its focus on jobs and the fragile economic recovery in keeping its keep interest rate near zero, as expected.
And while policy makers reiterated that they will keep rates extraordinarily low for an "extended period," they said that they intend to unwind some emergency lending programs when they are set to expire next year.
Commenting on the economy, the Fed says that activity has "continued to pick up" and that "deterioration in the labor market is abating."
The dollar firmed up as traders digested the news. The buck improved to 1.4515 versus the euro, coming close to yesterday’s 2-month high of 1.4502.
The price of crude jumped back above $73 a barrel on Wednesday, holding onto most of its early gains even as the US dollar rose following the Federal Reserve’s interest rate decision.
A larger than forecast draw down in crude stockpiles gave prices a lift. January crude rose $1.97 to $73.05 a barrel, a day after snapping a nine-day losing streak.
US crude stockpiles dropped last week, defying industry data suggesting a big build was in store.
The Energy Information Administration said Wednesday that commercial crude inventories fell by 3.7 million barrels to 332.4 million barrels in the week ended December 11.
Analysts were predicting a drop of 1.7 million barrels.
The Federal Open Market Committee forced considerable US Dollar as they predictably left interest rates unchanged, committing to “Exceptionally low” rates for an “Extended period”. Yet the Fed likewise recognized that “economic activity has continued to pick up and that the deterioration in the labor market is abating.” Yesterday’s surprisingly high Producer Price Index inflation numbers seemingly had little effect on long-term inflation forecasts and monetary policy, and officials stated “substantial resource slack [is] likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for quite some time."
The net result of the Fed’s actions was not immediately clear, as the US Dollar initially fell sharply but subsequently rallied against the Euro and other key counterparts.
- U.S. Inflation Rises On Energy Costs, Housing Starts Rebound
- U.K. Unemployment Unexpectedly Falls for First Time Since February 2008
- Australian Dollar Drops as Disappointing GDP Weighs on Rates Outlook
The US Dollar continues to remain firm at the mid-session. Last night the main trend turned up on the weekly chart leading to a firm opening this morning.
Early today, a jump in industrial output helped give the Dollar a boost as it represented another sign that the Fed is likely to lean toward hiking interest rates sooner than expected.
The EUR USD is threatening to break through 1.4500. Overnight sellers hit the Euro following the release of the German ZEW Economic Expectation Index report.
Today’s better than expected U.S. Industrial Output report is putting additional downside pressure on the Japanese Yen as it sends a signal to traders that the Fed is coming closer to hiking its benchmark interest rate.
The Federal Reserve said that industrial production increased by 0.8 percent in November after revised data showed that production was unchanged in October.
Economists had been expecting production to increase by 0.5 percent compared to the 0.1 percent increase originally reported for the previous month.
Traders are becoming more confident that the Fed will hike rates sooner than expected while the Bank of Japan is expected to keep interest rates unchanged at 0.10% on December 17th.
The increase in the spread between the two interest rates is triggering a reversal in the carry-trade. Investors are buying Dollars to payback loans while simultaneously borrowing Yen.
Weaker Gold and the stronger Dollar helped to trigger an overnight rally in the USD CHF. The up move accelerated following the release of the better than expected US Industrial Output report.
This market is now at its highest level since October. Look for the old top at 1.0337 to become new support.
Weaker gold and crude oil is putting pressure on the Canadian economy which is helping to give the USD CAD a boost.
This currency pair currently remains rangebound, however, with 1.0691 the upside objective and 1.0459 the downside support.
The AUD USD is feeling downside pressure at the mid-session as traders lowered to 66 percent from 80 percent the possibility of a Reserve Bank of Australia rate increase at its next meeting on February 2nd.
The RBA minutes from its last meeting released last night, showed that arguments for a third rate increase are “finely balanced”. This change in member attitude had the effect of “materially shifting the stance of policy to a less accommodative setting.” In other words, its time to take a pause in rate hikes. Technically, the Aussie rejected 50% resistance at .9167. The new downside target is .9014.
The NZD USD is trading lower at the mid-session. This market hasn’t been able to attract any buyers since the spike to the upside last week after the release of the hawkish statement by the Reserve Bank of New Zealand.
It’s beginning to look like the two day rally was enough for investors to adjust their dovish positions.
The dollar rose to the highest level in more than two months against the euro on speculation the US economic recovery will prompt the Federal Reserve to start reducing stimulus measures. Greek bonds fell for a second day.
The dollar strengthened against 15 of the 16 most-traded currencies tracked by Bloomberg at 12:12 pm in London (in Taiwan 20:12), advancing 0.8 percent compared with the euro.
While none of the 97 economists surveyed by Bloomberg predicts the Fed will begin raising interest rates at meetings today and tomorrow, investors anticipate the central bank will soon begin to drain some of the $12 trillion it has pumped into the economy.
Signs of recovery from the first global recession since World War II are increasing, and a Fed report today may show industrial production rose 0.5 percent last month, according to a separate survey.
The euro dropped to $1.4526 at 21:45 (GMT+8 ).
Most major Asian markets ended lower Tuesday, with Chinese property and financial shares dragged down on renewed fears Beijing may act to cool rising residential property prices.
There was caution a day after Abu Dhabi’s move to provide $10 billion in financing to help Dubai cover its debts helped regional markets rebound, with investors also warily looking forward to the U.S. Federal Reserve’s meeting and a batch of U.S. data this week.
Japan’s Nikkei 225 Average finished 0.2% lower at 10083.48, China’s Shanghai Composite fell 0.9% and Hong Kong’s Hang Seng Index gave up 1.2%.
Elsewhere, Australia’s S&P/ASX 200 rose 0.4%, South Korea’s Kospi added 0.1% and Taiwan’s Taiex fell 0.2%, while India’s Sensex fell 0.4% and Singapore’s Straits Times inched up 0.1% in afternoon trading.
Chinese property and banking stocks declined after China’s State Council said it would take steps to cool rapidly rising property prices in some cities and that it aims to improve supply of low-cost housing.
G+ Investor sentiment was boosted on Monday on news that Abu Dhabi has provide $10bn to Dubai’s support fund with the aim to facilitate an orderly restructuring and news that Citi and Wells Fargo plan to repay TARP money
G+ The S&P closed up +0.7% at 1,114.11, a new high since October 2008, with focus on corporate news amid a quiet economic calendar; Exxon Mobil (XOM, -4.3%, $69.69) agreed to buy XTO Energy Inc. (XTO, +15.4%, $47.86) for $31bn; Citigroup (C, -6.3%, $3.70) agreed with US regulators to repay $20bn in TARP funds; the bank will raise funds through sale of common stock ($17bn) and “tangible equity units” ($3.5bn); Wells Fargo (WFC, +0.3%, $25.49) will sell $10.4bn in stock to repay TARP
G+ European indices strengthened led by financials (DJ Euro Stoxx 50: +0.8%); the Nikkei ended with a small loss, lacking direction ahead of the FOMC announcement tomorrow; equity futures are trading higher at the European open
$ The US Treasury yield curve ended flatter but bids remained sparse in thin holiday trading; short-end USTs fell on the improvement in risk sentiment ahead of the FOMC but the long end stabilized after last week’s sell-off; the yield on the 2yr benchmark rose 5bps to 0.847%; the 2/10s narrowed to 270bps from 275bps on Friday
€ Mar’10 Bund trading 20 ticks down, reversing much of yesterday’s gain after failing to hold above the 123 mark; 122.79 last
$ The dollar weakened across the board while the yen strengthened against the G10 on the better-than-expected Tankan survey results; USD/JPY fell 0.8% to 88.60; EUR/USD rose 0.2% to 1.466; oil is trading at $69.7bbl, fails to hold gains above $70bbl
$ NY Fed: Investors requested $1.3bn in loans this month under the Fed’s legacy CMBS TALF program; there were no requests for loans under new issue CMBS TALF program
€ Austria nationalised Hypo Group Alpe Adria on Monday to prevent its collapse and will inject up to €450m
€ Eurozone industrial production fell 0.6%MoM in October after rising in each of the previous five months; the drop was led by lower output of durable (-1.4%) and non-durable (-1.6%) consumer goods; capital goods output stabilized vs. +1.5% previously
€ Eurozone employment fell at a steady pace of 0.5%QoQ in Q3 and was down for a fifth consecutive quarter; compared to a year ago employment was down 2.1% versus -1.8% in Q2, a record decline in the series’ history since 1996
£ The UK RICS house price balance rose to 35% in November, up from 34% in October, the highest since November 2006 but falling in below the consensus at 38% and marginally above our more cautious forecast at 36%
¥ Japan’s Ministry of Finance will increase JGB issuance for FY 2009/10 by ¥5.2trn to ¥137.5trn; it will hold an additional auction to offer ¥600bn of 30-yr JGBs and raise short-term treasury discount bill issuance by ¥4.6trn; FY 2009/10 bond issue to total ¥53.455trn; FY 2010/11 bond issuance to be capped at ¥44trn, which is seen by the government as helping to curb increases in long-term rates; Japan’s FSA Kamei urged aggressive budget steps to reign in borrowing
The dollar was only modestly weaker versus other major currencies on Monday, even after Abu Dhabi stepped in to rescue fellow emirate Dubai from its debt crisis, fueling a bit of risk appetite.
Global stocks gained, but the dollar managed to hold its ground versus the higher-yielding euro.
It is quoting now at 1.4647, compare to 1.4667 yesterday roughly at the same time (noon – GMT+8 ) loosing 0.14%.
Oil prices have fallen more than $8 a barrel since December 1 in the longest price slide since July 2001, as rising inventory levels in the United States showed a sluggish recovery in oil demand from the recession.
On Monday, Crude for January delivery fell 36 cents to settle at $69.51 a barrel. Brent crude traded up 1 cent to settle at $71.89 a barrel.
The fundamentals of oil demand are weak, and as the year comes to an end, people have been paying more attention to them.
Traders will look to US crude and product inventory data due out on today and tomorrow, as well the US Federal Reserve’s monetary policy decision, to be announced on Wednesday, as potential drivers for oil prices later in the week. Interest rates are expected to stay unchanged at near zero.
Ministers from the Organization of the Petroleum Exporting Countries say the group is likely to hold its output targets steady at a December 22 meeting. OPEC has been quietly putting more oil on the market since April, as prices rallied.
Oil has risen from below $33 a barrel last December. Keeping targets steady at the meeting, in Angola, would allow OPEC to continue to make unofficial adjustments in supply depending on the pace of economic recovery and prices next year.
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