The US dollar hit a 14-month low against a basket of currencies as policymakers in Europe and Asia remarked on the dollar slide, but options-related buying kept it from pushing through $1.50 per euro and 90 yen. Strength in global stocks, sparked by Apple Inc's forecast-beating third quarter earnings, also fueled investors’ appetite to sell the greenback for higher-yielding currencies and assets more closely correlated with economic recovery. In other news, data showing an unexpected 0.6 percent decline in US producer prices and a slight decrease in housing starts (as the government’s “First Time Buyer” $8,000 tax credit is coming to an end on November 30th) supported the view that the Federal Reserve will keep interest rates at record lows for some time yet. Until the market hears stronger rhetoric from the likes of European Central Bank President Jean-Claude Trichet, low US rates tied with rising asset and commodity prices will most likely continue to weigh on the US dollar.
The euro approached $1.50 for the first time in 14 months as better-than-forecast corporate earnings added to evidence the economic recovery is gaining traction, increasing demand for higher-yielding assets. The single currency also gained on speculation policy makers’ concern that the dollar’s weakness will slow Europe’s growth won’t lead to official action to shore up the greenback.
Sterling extended gains, hitting a fresh four-week high against the US dollar, boosted as the greenback came under broad selling pressure with solid US corporate earnings lifting demand for perceived higher risk currencies.
The Japanese yen slightly strengthened against the US dollar as Japanese Finance Minister Hirohisa Fujii made comments that recent dollar weakness was driven by the Federal Reserve’s “easy” monetary policy even though Washington may want a strong dollar.
The Canadian dollar fell against the US dollar after the Bank of Canada kept interest rates on hold and amplified a warning about the currency’s strength, saying it will “more than fully offset” recent signs of economic growth in the nation. Crude oil for November delivery fell as much as 0.7 percent to $79.06 a barrel on the New York Mercantile Exchange. Crude is Canada’s biggest export.
The Australian dollar advanced to fresh 14-month highs after hawkish central bank minutes reinforced views of a steep interest rate hike as early as next month. Market expectations for a more aggressive RBA interest rate hike and, to a lesser extent, excess global liquidity appear to be the most important factors behind the Aussie's outperformance. The New Zealand dollar settled in sight of 15-month highs as investors showed renewed enthusiasm for risky assets amid rising commodity prices and stronger-than expected US corporate results.
