The US dollar declined against all major currencies today as global stocks advanced on a risk appetite recovery. As a safe-haven currency, the dollar is being pressured by a rising stock market as investors poured back into riskier assets. In addition, there are speculations that worldwide central bankers will decide to maintain the stimulus measures during tomorrow’s meeting. During the session, Fed Chairman Ben Bernanke is scheduled to speak. Investors are shorting the dollar in preparation of the chance Bernanke will suggest another round of quantitative easing. On the data front, US weekly jobless claims posted a better than expected reading, at 473k vs. the forecasted 490k and previous 504k.
The euro advanced today following better than expected German GFK consumer confidence data. GFK confidence rose to the highest level in more than two years printing 4.1 vs. the forecasted 4.0, further boosting sentiment that the Europe’s largest economy is leading the recovery of the region. The EUR/USD traded at the high of 1.2758 as investors are seeing an improved equity market supported by short covering flows. Should the Eurozone fundamentals remain strong and risk appetite resume, the euro may rebound.
The British pound recovered against the majors, gaining 0.63% against the dollar as the US stock market opened higher. Failing to break below the 200-day moving average, the GBP/USD rebounded back up to 1.5600 levels on increased risk appetite during the US trading session. Central bankers from all over the world is scheduled to meet to discuss stimulus measures tomorrow. Should the meeting yield a hawkish tone, we may see the pound continue to rise above 1.5600 against the dollar.
The Canadian dollar recovered as the equity and commodity markets rose. Crude oil, the nation’s largest export, increased by $1.35 to trade at $73.84/bbl, while copper for three-month delivery increased 1.5% overnight, further supporting the loonie to recovery from yesterday’s one-month low against the greenback.
The Japanese yen fell against the majors following a comment from Suzuki Motor Corp. Chairman Osama Suzuki stating that the strong yen poses an “extremely grave” situation for the company and will have a significant impact on their company’s profit. Furthermore, Sony Corp also commented last month that they are currently losing about 2 billion yen of annual operating profit for each yen gained against the dollar. During a press conference in Vietnam today, Japanese trade minister Masayuki Naoshima called for stability of the currency market and noted that the yen is too strong. Furthermore, he expressed his concerns for Japanese companies as many are unable to maintain their factories within the country.
The Australian and New Zealand dollars rose against the safe-haven dollar and yen today as risk appetite boosted demands for higher yielding assets. There are increased speculation that Japanese policy makers will intervene on the appreciation of the yen, thus increasing investor’s appetite for the higher-yielding South Pacific currencies. The Aussie rose 0.5% and the Kiwi climbed 0.8% against the yen this morning. Both currencies recovered following a 0.3% rise of the S&P 500 Index and 0.5% rise of the MSCI Asia Pacific Index.
