The Greenback and Yen gain ground as CIT is on the verge of bankruptcy

The yen and the greenback rose as speculation CIT Group Inc. will file for bankruptcy and bombs in Indonesia spurred demand for the safe haven currencies as a refuge. The two currencies were also firmer on Friday as caution set in before more key U.S corporate earnings later in the day. Results from Citigroup, Bank of America and general electric are all due out later today and investors are closely following the new and what will happen in the stock market. "Currency markets are taking their lead from equities, with the dollar and yen generally firmer," said Adam Cole, global head of FX strategy at RBC Capital Markets. The EUR/USD is currently trading at $1.4100 as of 10:30am, London Time.

The Greenback may weaken considerably should U.S economic data on housing and company earnings come out better than expected. The U.S building permits last month came out at 0.52M and the expectations for this month is the same at 0.52M. Building permits are an Annualized number of new residential building permits issued during the previous month. It's an excellent gauge of future construction activity because obtaining a permit is among the first steps in constructing a new building. “If today’s data on the U.S. housing market surprises on the upside, the dollar could come under renewed pressure,” a team of analysts led by Ulrich Leuchtmann in Frankfurt wrote today in a report. “We expect some profit taking ahead of the weekend though, especially in the wake of the explosions in Jakarta.” The GBP/USD is currently trading at $1.6320 as of 10:42am, London Time.

The Canadian dollar depreciated after outperforming all other Group of 10 currencies this week as investors shied away from riskier assets such as commodity linked currencies. The loonie weakened for the first time in around four days amid the speculation the New-York based CIT may go into bankruptcy. Investors should buy the Canadian dollar against the yen because risk appetite is improving and Japan’s currency may suffer from political uncertainty, according to Citigroup Inc. “Risk appetite remains clearly on the mend,” the Citigroup analysts wrote. “Since equities, yields and commodities are all tracking higher in the wake of this improvement in sentiment, we suspect that the Canadian dollar may be among the biggest beneficiaries.” The USD/CAD is currently trading at 1.1180 as of 11:01am, London Time.

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