Dollar Weakness Persists Amid Inflation Concerns
Dollar Weakness Persists Amid Inflation Concerns
The dollar continued to sell off against most of the G10 today as commodity currencies were stampeding in other direction. EurUsd’s movement was mixed and is currently hovering in the $1.39 range. The GbpUsd rallied strongly to an eight month high of $1.65 and continues rising. Equity markets started off strong but are now flattening out with the Dow up under 1% and the Dax mostly unchanged from yesterday’s close at 50.37. 10 year bond yields are down and prices have risen 1.4% . Commodities rallied in the early session with crude oil reaching a seven month high at $68.7bbl, but it has since turned around to $68.2bbl. Gold surpassed highs for the past three months reaching $988oz.
The Dollar pared some losses overnight as risk appetite continues to strengthen on signs of a global economic recovery. Hoping to add to investor optimism Treasury Secretary Timothy Geithner reported from China that “justifiable confidence in the strength…of the American Economy,” assuring there will be demand for U.S . debt. Despite Geithner’s hopefulness, Chinese central bank Governor Xiaochuan is proposing a new global currency to reduce reliance on the USD. Overall response to the update was positive though, and Treasury yields dropped following Geithner’s comments. In the UK, BoE officials said it purchased 8.07 million pounds of corporate bonds planning to buy 175 million pounds worth on Thursday. This morning sterling began to decline against the USD from a $1.6465 close yesterday, but has since surged from its position greatly on increased confidence from new data on European PMI and UK housing prices. Many anticipate the euro’s rally against the USD to end soon, although it saw a rise to $1.4281 today which was the strongest against the USD for 2009. The only currency that declined against USD was the JPY, which lost nearly 1% mainly due to increasing interest spread between US and Japan.The Canadian dollar gained against the USD last night, climbing to a high of C$1.0782 today. The positive news spurred equity and commodity markets early on. OPEC expects oil prices to reach between $80 and $90 a barrel by early next year.
AC Markets
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