The US dollar lost ground against its Japanese counterpart but managed to strengthen against its European counterpart as the euro fell below the key psychological level of $1.25. The move came despite the release of jobless benefits rising to 542,000 last week and with the November Philadelphia Fed manufacturing index coming in at -39.3 from -37.5 in October.
With Fears of a global recession now deeply entrenched in investors minds, concern is starting to grow over potential corporate defaults. Look for the dollar to trade close to familiar ranges, but continue to benefit from safe haven flows.
The euro initially strengthened against the dollar, but failed to hold on to its gains as traders pushed the currency below the key psychological level of $1.25. In other news a spokeswoman for the German Economy Minister confirmed that the European Union will provide 1 percent of GDP to help finance a fiscal stimulus package.
The British pound continued its weakening trend falling both against the dollar and euro despite the fact that retail sales figures came in better-than-expected.
British retail sales fell by only 0.1 percent in October far less than the 0.9 percent forecast. Despite the better-than-anticipated numbers, though analysts still feel that the Bank of England will continue to be aggressive in cutting overnight rates. The market is starting to price in a 100 basis point cut in December with a 150 basis point cut most likely in January.
The Swiss franc weakened against the dollar after the Swiss National Bank cut overnight rates by a full percentage point surprising the market. The move followed a 50 basis point cut on Nov. 6 and a 25 basis point cut on Oct. 8.
The Japanese yen strengthened against the dollar despite exports falling by 7.7 percent, the worst decline in six years. Look for Japan’s single currency to hold on to its gains as investors continue to buy the safe haven currency amid growing concern over the global recession.
The Canadian dollar fell over 1 percent against the greenback as global stock markets fell across the board overnight and as oil continued its slide to $53 a barrel. The currency remained weak despite positive Canadian wholesale trade numbers. Wholesale trade in September rose 1.5 percent beating an expected decline of 0.3 percent. Look for the loonie to remain under pressure as further rate cuts are expected from Canada’s central bank.
The Australian dollar tumbled to one-month lows as equities remained under pressure falling 4 percent in Australia. A report out today showed Australia’s central bank intervened to buy A$ 3.15 billion in October, the largest monthly purchase ever. Look for the Aussie to continue to weaken as expectations for further rate cuts from the Reserve Bank of Australia grow.
The New Zealanddollar followed its Australian counterpart falling close to half a cent as risk aversion continued. The market will look towards the National Bank of New Zealand’s regional trends survey due out later today. Look for the kiwi, however, to remain under pressure as talk of further interest rate cuts from New Zealand’s central bank remain at the forefront of traders minds.
The Mexican peso tumbled close to 3 percent against the dollar as fears grew over major U.S. auto makers failing and hurting Mexico's car and auto parts industries. Look for the peso to remain under pressure as the reality of a US recession weighs on the single currency.
