Fri 26th Nov: Dollar flops as the traders go for shops

Dollar extended its fall for yet another day against the majors, as the non-dollar importers sit gasping and perspiring in expectation for a correction.
Traders, hedge funds and Central Governments, all of them seem to have lost faith in the World’s most dominating currency.
The euro climbed to a high of 1.3240 in a very thin trading (as US markets observe the Thanksgiving holiday), despite the German Business Community losing confidence (Index falling to 94.10 against 95.3 last month) due to the incessant rise in the domestic currency.
However, it is very clear that the markets have closed their eyes to any economic indicator being released from any corner of the world.
It appears that the bull - run in any non dollar currency would only stop if the community is convinced of the regular portfolio flows and possibility of a reduction in the deficit figures of the US.
Yen also moved to its multi year high of 102.40, despite a continued jaw-boning by the Government of Japan. It would take a heavy intervention by BoJ to stop this run.
We would advise the receivers of non-dollar currencies to start hedging their exposures, while the importers should keep a level to hedge their risk.

Thu 25th Nov: Greenback plunging to new nadir everyday

Euro steamed ahead to an all-time high of $1.3188 hit just before the start of Tokyo trade as a mixed bag of data from the US led the major currencies on a renewed dollar-bludgeoning trail.
Other majors like Sterling hit 1.8827 and Yen cautiously climbed up to 102.70 levels as traders decided to dump dollar despite US new homes sales rising to 1.23-million units (the 3rd highest in record) and unemployment claims dropping to their 2-month lowest levels of 323K (falling by 12K).
There was mix of economic data released as the University of Michigan’s consumer sentiment measured 92.8 (previous: 91.7) below the forecast reading of an optimistic 96 and durable goods orders fell by a disappointing 0.4% (forecast: 0.5% rise) in spite of strong demand from defence.
Crude prices rose to $49.44 amidst tight winter supplies in the US.
Yen did well for itself as the “All economic activity index” fell only by 0.1% in September against forecasts of a 0.4% decline and tertiary industry index rose 0.1% beating expectations of a 0.4% decline.
Markets await the current account data for September from the ECB and the German IFO business sentiment survey expected to fall, but with the momentum notched up by the majors against greenback, it might just prove to be a minor blip amidst holiday mood percolating in the markets.

Wed 24th Nov: Euro rallies past $1.31 on reserve review talk by Russian central bank, gold a whisker away from $450

The single currency finally breached the $1.31 mark yesterday in a technically driven and thinly traded market.
This movement was triggered by comments from Russia's Deputy central bank chairman who stated that the bank might review its holding of euro assets which was taken as a signal by the market to be a move by the bank to increase its euro reserves. The euro topped out for the day at $1.3105.
The market today focusses on important data releases like the US weekly jobless numbers, durable goods(expected to rise higher) and final Michigan sentiment numbers.
But it seems as if the traders are completely ignoring the short term US fundamentals and thus any dollar relief rally is very short lived. Further no intervention rhetoric from the EU officials and business houses also appears to be supporting the euro rally.
The Yen- despite an increase in the rhetoric by the Japanese central bank hovers around the early 103 mark as the markets await the numbers of tertiary services and the All industries index.
Gold took a further cue from the euro by shooting up to fresh 16 year highs of just short of $450 mark while increased concern over oil supplies from Iraq after a pipeline burst helped the crude oil futures rise to $50 yet again.

Tuesday 23rd Nov: Dollar grateful to the “Thanksgiving” holiday lull

The greenback did not see any improvement in its fortunes against the crosses but neither did it lose further ground in pre-holiday thinned trades.
The single currency is currently trading at 1.2978 as euro net long holders pare some of their positions ahead of Thanksgiving holiday.
Even some mild rumblings from Euro zone officials over the growth prospects getting hurt by brisk euro gains, have not transformed into any concrete intervention till now. The EU Monetary Commissioner Al Munia did not help matters by stating that Euro zone could remain competitive with euro at current levels as long as there were no volatile currency actions.
The BoJ Governor Fukui joined his European counterparts in exhorting US to tackle its twin deficits and not rely on currency adjustments for a "quick fix” solutions.
The Canadian dollar rose to a fresh 12-year high at 1.1826 against the greenback after the country’s central bank chief ruled out intervention unless in extraordinary circumstances.
The economic data releasing today from Japan - the September Industry index, tertiary industry report with forecasts of a fall, may give BoJ the handle it has been waiting for to pare the currency gains.
The US October existing home sales are expected to be flat.
Oil trades not much changed at $48.33 per barrel since the morning trade after hitting above the $49 mark in the European session yesterday.

Monday 22nd Nov: Dollar hold firm after weekend meetings

The dollar held steady against most major currencies in European morning trade on Monday as the market awaited signs of government intervention, either verbal or actual.
The weekend meeting of G20 finance ministers in Berlin and the APEC summit in Santiago failed to provide any fresh sense of direction for the market.
The G20 communique pledged the US to cut its yawning budget deficit, and Europe to introduce measures to support domestic demand, but made no mention of the sliding dollar.
The APEC meeting proved similarly inconclusive for the market, with Chinese officials insisting they were not pressured by the US to relax their peg against the dollar.
President Bush did reassert his support for a “strong dollar policy”, but such rhetoric is increasingly being viewed as hollow by traders.
“The political gatherings over the weekend did not result in any substantial policy shift that would lead foreign exchange market participants to question the continuation of the current trend of dollar selling,” said Derek Halpenny, senior currency economist at Bank of Tokyo-Mitsubishi.
“With little sign of any political attempt to arrest the decline in the dollar, market participants are likely to revert their focus to Friday’s comments from Fed chairman Alan Greenspan who stated that foreign investors would ‘at some point’ likely tire of increasing their holdings of US securities rendering the funding of the current account deficit problematic.”
The G20 communique did call for greater exchange rate flexibility from “emerging” Asian economies, but any fresh support for Asian currencies was lessened by Hiroshi Watanabe, the Japanese vice finance minister, who described the yen’s recent rise against the dollar as “too rapid” and said the yen had the potential to “become a big concern”.
Amid jitters that Japan may lead a renewed bout of intervention, the yen drifted a fraction to Y103.12 against the dollar and the South Korean won slipped a little to Won1,065.3 against the greenback.
The dollar was also little changed at $1.3032 to the euro, although it strengthened to $1.8538 against sterling. The pound was generally weak, slipping to a fresh 11-month low of £0.7029 against the euro and to Y191.15 against the yen.
The catalyst was the latest soft UK housing market report, with Rightmove reporting a 1.7 per cent slide in prices in November, just a day after reports that Barclays Bank sees house price falling 20 per cent over the next three years. Such talk lessens the likelihood of any further UK interest rate rises.
The Canadian dollar firmed to C$1.1910 against the greenback after David Dodge, the governor of the Bank of Canada, said the loonie appreciation against its southern counterpart was not inappropriate, and that he only favoured currency intervention in “exceptional circumstances”.