The yen fell to a two-month low against the dollar following news that Japan had recorded its first yearly trade deficit since 1980. Japan’s manufacturing sector is still struggling with problems stemming from last year’s earthquake and ensuing tsunami with some large production facilities still offline.
The drop in production has impaired sales of Japan’s products – particularly automobiles – and global inventories for some products are still below normal levels. The resulting drop in sales has impacted Japan’s trade balance and is responsible for the current trade deficit.
Source: Reuters
It’s been another challenging year for the American economy. Unemployment has been stuck above 9% for months, consumer spending has been stuck in a rut, and overall growth has slowed. Yet, the dollar has still managed to make substantial gains against other major currencies.
For several weeks, 60% of those trading the euro against the dollar have been buying the dollar. And for those trading the U.S. dollar against the yen, more than 80% have favored the dollar over the yen.
Source: CNNMoney
The dollar was weaker against most of the major currencies today as investors bet on the continuation of the “QEII” stimulus spending program. The euro was also boosted on speculation that the European Central Bank will make overtures towards the need to raise interest rates in the Eurozone.
“As long as the Fed retains its stance, the interest-rate differentials will move against the dollar,” said Neil Jones, head of European hedge fund sales at Mizuho Financial Group Inc. in London. “There’s a lot of bullish sentiment that Trichet will move to a more hawkish stance and discuss removing the stimulus. That’s one of the key reasons for euro strength.”
Source: Bloomberg
Fearing that the US Federal Reserve could devalue the dollar should it go on a buying spree to help support the economy, investors turned to the perceived safety of gold pushing prices to a record $1,313.20 an ounce. Meanwhile, the US dollar continued to fall, declining to a five-year low against the euro.
“Gold is flying because of concerns over a weakening dollar, and the prospect of quantitative easing,” said David Wilson, an analyst at Societe Generale. “Our internal house view is for a slight softening of the dollar over the next 3-6 months.”
Source: Reuters
The US House of Representatives is expected to pass legislation today that defines China’s manipulation of its exchange rate as being the same as providing a subsidy to Chinese manufacturers. Classifying China’s exchange rate policy in this manner will likely be used to justify additional duties on Chinese goods imported into the US.
While still requiring Senate approval and President Obama’s signature before becoming law, there is no question that the rhetoric between the two trade partners has increased in intensity of late.
Source: Reuters
The Central Bank of Japan announced it would be selling yen and buying dollars in an attempt to slow the yen’s appreciation after hitting a 15-year high against the greenback. An appreciating yen hurts Japan’s exports as it makes products shipped from Japan more expensive for foreign markets.
Source: BBC News
Over the last few days, Spain, Ireland, and Greece have combined sold nearly 10 billion euros (US$13 billion) of debt. There is even growing demand for more short-term bonds from these high-deficit countries and this is easing concern for the rest of the euro zone.
“Overall funding pressure is losing steam,” said David Schnautz, a fixed-income strategist at Commerzbank AG in London. “We expect the peripheral markets to enjoy even more potential outperformance against the core. Obviously we still have this event risk looming with the banks’ stress tests.”
Source: Bloomberg
The Canadian dollar climbed against the greenback on Thursday after data showed a sharp drop in U.S. weekly jobless claims and the price of new homes in Canada rose in May for the third straight month.
The Canadian dollar hit a session high of C$1.0422 to the U.S. dollar, or 95.95 U.S. cents after the data, up from Wednesday’s finish at C$1.0478 to the U.S. dollar, or 95.44 U.S. cents.
The euro fell to its lowest point in six months against the dollar today as investors continue to shun the currency amidst growing concerns with the status of Greece’s overwhelming debt. Despite a vote of confidence from French Finance Minister Christine Lagarde, the euro fell to 1.3913 USD from Thursday’s close of 1.3966.
Source: AFP News
The US economy grew 5.7 percent in the fourth quarter last year as measured by the Gross Domestic Product (GDP). This is the fastest quarterly growth in six years.
“Business are now feeling confident enough to deploy a larger portion of the recent strong corporate earnings rebound into new investment spending,” Brian Bethune, chief financial economist at IHS Global Insight in Lexington, Massachusetts, said before the report was released. “This is a key development to support a strong, non-inflationary recovery.”
Source: Bloomberg
