The US$ is stronger in the O/N trading session. Currently it is lower against all of the 16 most actively traded currencies, in a ‘whippy’ trading range.
The US$ currently is higher against the EUR 1.10%, GBP 0.93%, CHF 0.87% and JPY 0.37% The USD strengthened after Rating agencies announced Banking downgrades in Eastern Europe. Optimism that the Stimulus plan might be boost the US economy has spurred investors to seek refuge in the USD as its government seems to be moving forward with mechanism to improve the economy.
The commodity currencies are lower this morning, CAD 1.01% and AUD 1.43%. President Obama announcement of a mortgage rescue plan renewed investor’s risk appetite and higher yielding currencies benefited. There is speculation that the Governor of the BOC will cut rates again in March 3rd, the current Canadian benchmark rate is 1.00%.
The AUD (0.6404) recovered lost ground after the Australian stimulus plan was passed in the Senate after some last minute negotiating. The package is A$42Billion received 30 votes in favor vs. 28 against. The news boosted the AUD as the package includes cash handouts to millions of Australians with the first payment due in March.
Crude is lower O/N ($37.10 down -109). Doubts that the US Economic Stimulus plan will be successful and rising inventories continue to pressure oil prices. Oil fell to a seven week low after the report from the IEA cut world crude demand by 980,00 barrels to 84.7 million in 2009. Supply rose again (by 4.7 million barrels) to further bring down the price of the black stuff. Oil has retreated sharply from historic highs of $150 a barrel last summer. OPEC members announced a production cut in order to boost the price of crude above its current levels, which they claim are not enough to invest in new supply.
Gold ($961) appreciated after breaking the $900 level, after the metal has been perceived as a safe haven. Gold has decoupled from oil and extends its gains alongside the USD as both are viewed as safe havens for investors.
The Nikkei closed at 7,649 down 104. The DAX index in Europe was at 4,243 down 120; the FTSE (UK) currently is 4,031 down 103. The early call for the open of key US indices is lower. The 10-year Treasury yields fell by 3bp (2.75%). Bond prices have dropped after the US government sold $67 Billion in three year, 10 year and 30 year notes this week. Fundamental data has been pointing to a decline of the USD, but the mixed feelings the market has about the stimulus plan and the rise of risk aversion strategies have made the Dollar a safe asset.
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Alfonso Esparza
trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
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