The British pound was up 0.64% vs. the dollar

The US dollar weakened across the board as Wall Street opened positive tracking European stocks and ahead of Federal Reserve comments on the state of the economy. Though uncertainty about the pace of recovery and interest rate policies lingered in the market, risk sentiment moderated pushing the dollar lower. The dollar remains under pressure as US consumer credit for July and the Federal Reserve Bank’s Beige Book is released later today.

The euro lost ground against the dollar overnight after weaker than expected German exports and industrial output, but recouped those losses as risk-aversion eased. Data from the Federal Statistics Office reported that exports, the main driver in Germany’s rebound fell by 1.5% while imports shrank by 2.2%.
Industrial output inched up by 0.1% in July, altogether missing the forecast target for a 1% increase. The euro erased earlier losses after improved demand for European bonds. Portugal’s bond sale and Poland’s auction of five-year debt attracted the strongest bids since 2008.

The British pound was up 0.64% vs. the dollar, rebounding from six-week lows after data eased concerns about a slowing housing market. Data from mortgage lender Halifax reported house prices rose for the second time in August by 0.2%.
Data from the statistics office reported industrial output rose 0.3% in July recovering from a 0.5% fall in June

The Japanese yen struck a fresh 15-year high against the dollar rising 14% since May and struck a peak-high against the euro overnight as concerns about Euro zone banks and sovereign debt prompted risk aversion and a flight to safety. Bank of Japan Governor Masaaki Shirakawa reiterated his reluctance to quantitative easing but indicated the central bank was weighing its options. On the other hand, Finance Minister Yoshihiko Noda warned decisive actions would be taken by him if necessary. On the economic data front, a Cabinet Officer report showed Japanese machinery orders rose 8.8% in July, the most in seven months.

The Canadian dollar gained on the US dollar after Bank of Canada raised its benchmark interest rates for the third consecutive month. The central bank nudged its overnight rate target by 25 basis points to 1% but sounded hawkish despite predicting a more gradual than expected economic recovery.

The Australian and New Zealand dollars pared gains vs. the US dollar as risk-aversion eased amongst investors. The Aussie and the Kiwi were also supported by gold prices nearing record highs and oil prices nearing $74 a barrel.

The Mexican peso strengthened for the first time this week supported by a rise in global stocks. The peso rose 0.5% on the dollar as investors’ appetite for risk was whet.