The Japanese yen was slightly stronger vs. the dollar with risk aversion helping the currency

The US dollar strengthened vs. most major currencies with continued global economic weakness moving investors into the safety of the dollar. Interest rate cuts by the European Central Bank and Bank of England on weakening economic prospects helped boost the dollar. US business productivity growth slowed sharply in Q3 to an annual rate of 1.1% adding to the weak economic picture.
Investors are looking forward to US jobs data to be released on Friday.

The euro fell against the dollar after the European Central Bank cut interest rates by 50 basis points to 3.25% and signaled that more cuts were possible. ECB President Jean-Claude Trichet also told a news conference that cutting interest rates by 75 basis points was discussed, though the unanimous decision was to cut by 50 basis points. Trichet also said that Euro-zone inflation will likely be close to the ECB’s target rate of 2% next year. Euro-zone inflation fell to 3.2% in October from over 4% in the summer. German manufacturing orders posted a 8% monthly fall in September, the biggest since 1990.

The British pound weakened against the dollar after a surprise interest rate cut by 150 basis points to 3%. The Bank of England’s 150 basis point cut was the biggest official interest rate cut since 1981. The BoE said that the economic outlook had worsened and that drastic action was needed right away. The British economy shrank for the first time in 16 years and economists expect contraction to continue through next year. Economic weakness was highlighted by data that the UK Halifax House Price Index had a 14.9% year-on-year fall in October.

The Japanese yen was slightly stronger vs. the dollar with risk aversion helping the currency. Forecasters expect the yen to stay in current levels against other major currencies as global financial weakness keep investors in the risk-averse currency.

The Canadian dollar weakened against the dollar today as crude oil prices fell below $64 a barrel. Global economic weakness has caused demand for crude oil to fall sharply, leading to lower crude oil prices. This hurts the Canadian dollar as it is a major exporter of crude oil.

The Australian dollar moved further away from recent two week highs of above 0.7000 against the dollar. Continued worries of global economic slowdown kept investors wary of high-yielding currencies and overshadowed strong domestic data. Data from the government showed that there were 34,300 new jobs in October beating forecasts of a 10,000 job loss. The jobless rate held steady at 4.3% ahead of expected increase to 4.4%.

The New Zealand dollar also fell against the dollar with risk aversion keeping investors away from the high-yielding currency. The New Zealand jobless rate rose to a near five year high of 4.2% in Q3.

The Mexican peso continued its weakness against the dollar on economic weakness of the US. The Mexican economy is tied closely to the US economy as the US is their top trade partner.