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Daily U.S. Forex Summary

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The US dollar remains within its recent ranges

Fri, Jul 11 2008, 05:45 GMT
by Union Bank of California Team

Union Bank of California

The US dollar remains within its recent ranges, buoyed by steady oil prices and some technical buying, but gains were capped by lingering worries about credit market turmoil and sharp losses in global stock markets. An unexpected decline in U.S. weekly jobless claims gave the dollar an extra boost, although analysts say the continuing claims data reflect the ongoing deterioration in the labor market. The number of U.S. workers filing new claims for jobless benefits dropped by a much bigger-than-expected 58,000 last week to 346,000 on a seasonally adjusted basis.

Investors continue to focus on capital-raising concerns at the two largest U.S. mortgage funders, Fannie Mae and Freddie Mac. Worries intensified after Bloomberg News quoted former St. Louis Federal Reserve President William Poole as saying both agencies are "insolvent."
Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson are scheduled to testify on regulatory restructuring before the U.S. House of Representatives Financial Services Committee.

The euro was hit early after data showing French industrial production dropped much more sharply than expected in May, sunk by downturns in the automobile and energy sectors.
Analysts believe that euro gains will be capped at $1.5870, over the next few sessions.

The British pound is struggling this morning against the dollar and euro, showing little reaction to the Bank of England's widely expected decision to hold interest rates unchanged at 5%.
The BofE did not explain its decision as is usual whenever it leaves rates steady, but analysts said the on-hold verdict came as no surprise given the twin threats of a slowing economy and surging inflation.
Additional bad news on the economy came earlier after Britain's biggest mortgage lender HBOS Plc said house prices fell 2% in June, twice the amount analysts polled by Reuters had expected.

The Japanese yen continues to trade within recent ranges, with sharp moves capped by increasing oil prices. Japanese wholesale prices rose more than expected in June from a year earlier, to hit a new 27-year high but that had little impact on markets.

The Canadian dollar was little changed against the U.S. dollar, as traders bided their time ahead of the key domestic jobs report due on Friday and next week's Bank of Canada rate announcement, where it is expected that rates will remain steady at 3%.
The June employment figures, the last piece of data the Bank of Canada will consider ahead of its next scheduled rate decision on July 15, are expected to show the economy created 10,000 jobs in June with an unemployment rate of 6.1 percent.

The Australian dollar climbed past .96 for the first time in three days after the strong jobs data kept alive chances of an interest rate hike. Australian employment rose by 29,800 in June, beating analysts’ expectations of a rise of 10,000. The rise was due to a rise of 24,000 in full-time employment, while part-time employment rose by 5,800. The jobless rate fell to 4.2%.

The New Zealand dollar retreated from one-week highs, as weak manufacturing data added to the case that the economy was in a recession and interest rates will soon start falling.
A worsening domestic economic outlook will determine the direction for the kiwi, analysts said, with the market currently seeing a 50/50 chance of a rate cut by the Reserve Bank of New Zealand at its policy meeting on July 25.
The retail and inflation numbers are due on July 14 and 15 respectively.

Published on  Fri, Jul 11 2008, 05:49 GMT

Archive

• The US dollar strengthened vs. most major currencies
  Published On Mon, Oct 13 2008, 05:39 GMT
• The US dollar rose sharply against the yen
  Published On Fri, Oct 10 2008, 06:41 GMT
• In another attempt to calm the global financial markets
  Published On Thu, Oct 9 2008, 07:14 GMT
• The Canadian dollar continued its descent against the US dollar
  Published On Wed, Oct 8 2008, 07:25 GMT
• The US dollar continued its upward trend against the euro
  Published On Mon, Oct 6 2008, 06:51 GMT

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