Dollar aided by a good show of data

The dollar ended stronger as US economic data provided cause for optimism.
Durable goods orders increased 0.6% the labor market data was also encouraging as jobless claims came in much better than expected for the second consecutive week falling to 325,000.
The better economic data from the US only helped the dollar rally modestly against the European currencies, as the euro dipped to 1.3011 and sterling falling to below the 1.88 mark temporarily.
The Euro/ dollar pair continues to trade in a range ahead of the unemployment report from Germany, which is expected to be exceptionally weak.
The Japanese currency was affected by rather weak retail trade data falling to a low of 103.55. Traders bid the yen higher to the 103 levels before better economic data from the US pared the currency lower.
Oil prices edged higher ahead of the elections in Iraq and the OPEC meeting this weekend.
China's revaluation continues to be the topic of attention for dollar sentiments, as suggestions for a move to a managed float against a basket of currencies (Euro, Yen Dollar) would in fact be positive for the euro.

China’s somersault on currency peg dents dollar

In the space of 2 days (after indications of nonchalance to global pressures to revalue yuan), China relented and agreed to discuss the currency peg at the G-7 meeting.
But China’s concurrence to sort out this issue may just be tactics to get the heat off its back from the global heavyweights and we may have to wait for the actual event for sometime.
Yen gained to 102.50 levels on the news before Japanese industrial production and consumer spending (that fell by 1.2% and 0.6% in the December reading), exerted some pressure on Yen in the Tokyo session today. But Yen still keeps its head above the critical support of 103.35.
Euro found strength from an unanticipated rise in the Germany’s IFO business sentiment survey (11-month highs), briefly stabbing at the 1.31 area before retracing to 1.3070 levels in the morning session today.
Sterling rushed to a 2-cent gain after the growth in services sector more than made up for the lull in manufacturing, giving some respite to the Bank of England grappling with a slight slowdown in the economy. Belying this worry was the Q4 GDP growth that recorded a rise of 0.7% (expected: 0.5%), revoking the talks of a rate cut.
Despite the fall of dollar against majors on the Chinese whispers on Yuan, the greenback finds some technical support ahead of the GDP data release tomorrow, which is expected to show that the US economy has shown fastest growth since 1999.

Yen slides as China sticks to its guns

The yen fell sharply on Tuesday as lingering hopes that China would revalue the renminbi to coincide with the forthcoming G7 conference finally appeared to bite the dust.
The market took to heart the words of Li Deshui, head of China’s National Bureau of Statistics, who said: “China doesn’t have conditions to adjust the renminbi exchange rate at present. We need a good and feasible plan and formulating such a plan needs time.”
The comments lessened the likelihood of China injecting more flexibility into the renminbi, which has been fixed at Rmb8.278 against the dollar for a decade, despite repeated calls from US and eurozone politicians for it to do so.
John Snow, the US Treasury secretary, added to perceptions that nothing concrete will be achieved at the G7 meeting in London on February 4-5, saying he expected “no change in foreign exchange language”.
As a result, official Asian demand for dollars is likely to remain strong, the rating agency concluded.
The Canadian dollar slumped 1.1 per cent to C$1.2375 against its southern neighbour as the Bank of Canada, which held interest rates at 2.5 per cent, as expected, cited currency strength as the principal reason for weaker-than-expected growth. Since May 2004 the Loonie has risen 11.7 per cent against the greenback.
The US dollar’s gains against the yen and Loonie were seen as the spark for a broader rally which saw the greenback firm 0.6 per cent to $1.2952 against the euro and 0.8 per cent to $1.8642 versus sterling.

Weak dollar story continues

The Dollar fell again as a number of factors had a negative impact on it.
Pressured by rising oil prices, currently at $48.88 due to a colder US weather, persistent violence in Iraq and comments from US Treasury Secretary - John Snow on not expecting the G7 finance ministers to tinker with the wording of their currency market statement during their meeting next weekend, yen dropped all the way to 103 before stabilizing towards the 102.60 levels.
In its policy board meeting, Bank of Japan sought to reduce liquidity by lowering its account balance target but would closely monitor the forex moves and the rising oil prices.
As Europe once again called for Asian countries to share the burden of a weakening dollar, euro weakened against the yen to 133.70. Sterling hovering around 1.8770 awaits Monetary Policy Committee minutes due tomorrow to take any further direction.
A rise in Aussie CPI by 0.8 percent from Q3 and up 2.6 percent y/y sees AUD at 77 cents against the dollar.
With an eye on today’s US existing home sales (expected lower at 6.8 million from a 6.94 previous) and a fall in consumer confidence, the market could be range bound before the US session with dearth of data expected from the euro zone.

Monday 24th Jan: Weekend profit taking and soft consumer sentiment weighs on the Dollar

The Dollar fell across the board on Friday as weekend profit booking just before the single currency hit a crucial barrier at 1.2930 and a softer than expected Michigan consumer sentiment data hit the market.
Rumors that the Fed Chairman Mr. Greenspan was not in favor of increasing the pace of rate hikes added fuel to the euro’s rise, leading to a fall in the US currency by almost a cent. Further comments by various Fed officials reiterating the Fed’s stance of rate hikes at a “measured pace” failed to change the market outlook.
Sterling also regained some of its lost ground piggybacking on its European cousin’s gains even though retail sales figures dropped 0.1 percent - its largest drop since 1981.
Yen also gained around 1.4 yens after losing steam during the week on hawkish comments from the Fed speakers and reports stating that China may not revalue its currency until next year. But Bank of Japan appears to be increasingly comfortable with Yen’s gains as the economy is wriggling out of its decade old deflationary spiral.
This week the market will look out for a plethora of data releases from the US including consumer confidence, the durables goods orders and advanced Q4 GDP.