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The Dollar strengthens below $1.47 as U.S home sales plummet and inventors go fo

Thu, Oct 29 2009, 08:29 GMT
by Benny Menashe

Finotec Group Inc.

The greenback and yen gained against most of their major counterparts on speculation an unexpected decrease in U.S. new-home sales in September damped demand for higher yielding assets. Target lending rates of 0.1 percent in Japan and as low as zero in the U.S. make the yen and dollar favored targets for investors seeking to fund carry trades. “We continue to target the dollar at $1.45 per euro in one month as risk sentiment is clearly showing signs of strain,” Singapore-based Gareth Berry, a currency analyst at UBS AG, wrote in a research note today. The Dollar Index, which the ICE uses to track the greenback against currencies including the euro, yen and pound, gained for a fifth day in the longest stretch of advances since July, increasing 0.4 percent to 76.416. The EUR/USD is currently trading at $1.4715 as of 21:20PM, GMT.

Sterling fell to a one-week low against the yen on Wednesday, with sentiment dented by falls in equity and commodity prices that encouraged investors to pare back exposure to currencies perceived as higher risk. The pound trimmed earlier losses against the dollar and the euro, however, with some analysts saying an interest rate rise by the Norwegian central bank provided a modicum of optimism that the global economy is gradually improving. But any gains are expected to be shaky at best as investors look ahead to the Bank of England's policy decision next week, with market players wary of the possibility of a further increase in asset purchases. "The high degree of uncertainty going into next week's BoE meeting contains the risk of ongoing market nervousness and a higher volatility," KBC analysts said in a note. The GBP/USD is currently trading at $1.6380 as of 21:24PM, GMT.

Canada’s currency depreciated against its U.S. counterpart to the lowest level in more than three weeks as declines in crude oil, the nation’s largest export, and stocks damped demand for higher-yielding assets. The Canadian dollar, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, fell against 11 of the 16 most-traded currencies tracked by Bloomberg, including the yen, euro and pound. The U.S. dollar rose against 14 of them. Bank of Canada Governor Mark Carney reiterated today during testimony in Parliament that a strong loonie threatens the nation’s economy. The loonie extended its decline against the dollar as sales of new U.S homes unexpectedly fell 3.6 percent in September, raising concern that an economic recovery in Canada’s largest trading partner may be losing momentum and increasing demand for the safety of the U.S. dollar.

Today's Economic Events

Published on  Thu, Oct 29 2009, 12:11 GMT