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Dollar, Euro, Pound & Yen

22:57 Tuesday 8 June, 2010

Deutsche Bank AG pushed back its forecast that the euro will strengthen to $1.35 to the first quarter from the end of this year, saying the common currency may first drop to as low as $1.15.

“We see risk aversion driving the dollar higher over the summer, but expect dollar weakness beyond that,” Bilal Hafeez, chief currency strategist in London, said today in an investor report. “We therefore maintain our bullish profile for the euro for the second half of 2010, though we extend the time needed to reach our $1.35 target.”

22:51 Tuesday 8 June, 2010

Sterling fell against its major peers while the Australian and Canadian dollars rose as Fitch Ratings said the U.K.’s fiscal challenge is “formidable,” fueling demand for currencies of nations with strong balance sheets.

The dollar rose against the yen after Federal Reserve Chairman Ben S. Bernanke said the U.S. recovery is moving at a “moderate” pace. The Japanese currency fell against most major counterparts as Bernanke said he didn’t know when the Fed would begin the process of raising interest rates, boosting demand for higher-yielding currencies.

“The Fitch comments were a warning shot and highlight the risks if the U.K. doesn’t release a plan that’s strict and credible,” said Camilla Sutton, a Bank of Nova Scotia currency strategist in Toronto. “Bernanke’s comments were reassuring. Monetary policy will be looser for longer, and that’s a big benefit to markets that’s not fully priced in.”

The pound fell 0.5 percent to $1.4394 at 8:52 a.m. in New York, from $1.4468 yesterday. The yen slipped 0.1 percent to 91.48 per dollar, from 91.37 yesterday. Japan’s currency slid 0.3 percent to 109.27 yen per euro, from 108.95. It touched 108.08 yesterday, the strongest since November 2001. The euro was little changed at $1.1928, compared with $1.1923 in New York yesterday.

15:29 Tuesday 8 June, 2010

The yen weakened against all of its most-traded counterparts as Asian equities ended two days of losses, boosting demand for higher-yielding currencies.

The dollar gained versus Japan’s currency after Federal Reserve Chairman Ben S. Bernanke said the U.S. recovery is moving at a “moderate” pace. Europe’s common currency rose as he said the region’s leaders are committed to avoiding a default and their bailout plan covers the obligations of Greece, Portugal and Spain “for a number of years.” Parity between the euro and the dollar is unlikely, Portugal’s Economic Minister Jose Vieira da Silva told reporters in Shanghai today.

“Bernanke’s comments have had a soothing effect on markets after what’s been a pretty bleak few sessions,” said Tim Waterer, a foreign-exchange dealer with CMC Markets in Sydney. “The mood on Asian equities is a bit calmer and that’s allowed some of the currencies that have been heavily hit, like the euro and Aussie, to eke out gains.”

The yen fell to 91.79 per dollar as of 6:53 a.m. in London from 91.37 in New York yesterday. Japan’s currency weakened to 109.87 per euro after touching 108.08 yesterday, the strongest since November 2001. The euro traded at $1.1971 from $1.1923 in New York yesterday, when it sank as low as $1.1877, the weakest since March 2006. The Australian dollar rose 1.1 percent to 81.94 U.S. cents, paring its decline in June to 3.1 percent.

11:19 Tuesday 8 June, 2010

Jean-Claude Trichet used a simple chart to convince European leaders the euro was in grave danger.

It was Friday, May 7. Spanish, Greek, Portuguese and Irish government bonds were plunging, sending shudders through world markets and fueling speculation Europe’s 11-year-old monetary union could collapse. The European Central Bank’s president traveled to an emergency Brussels summit of heads of government armed with graphs to dramatize how bad things were.

“My main message for the governments was: Some of you have behaved very improperly and have created an element of vulnerability for your own country, and by way of consequence for Europe,” Trichet recalls. “Now the situation calls for taking up responsibilities.”

By 3:15 a.m. the following Monday, Europe knew the price of that responsibility: an unprecedented 750 billion-euro ($900 billion) aid package to prevent a debt spiral, backed by a credibility-testing pledge from the ECB to purchase the bonds of distressed governments, all to keep the $11 trillion, 16-nation economic and monetary experiment afloat.

Guiding the euro’s fate from the 35th floor of the ECB’s headquarters in downtown Frankfurt, Trichet says he’s never known “calm waters” and is “used to crisis.”

11:16 Tuesday 8 June, 2010

The dollar remains in a downtrend against the yen and may weaken to the lowest level since 1995, according to Mizuho Corporate Bank Ltd., citing technical charts.

The dollar rate is still within the so-called cloud of a weekly ichimoku chart, indicating the greenback’s downward trajectory that started in 2007 is still intact, said Hiroyuki Tanaka chief technical analyst at Mizuho Corporate Bank in Tokyo.

“The cloud’s baseline is at 89.94 yen this week,” Tanaka said in an interview. “Should the dollar dip and stay below 90 yen this week, it may extend losses.”

Falling below the baseline means the dollar will go below the cloud of the ichimoku chart and gain downward momentum, according to Tanaka.

11:13 Tuesday 8 June, 2010

The yen weakened against all of its most-traded counterparts as Asian equities ended two days of losses, boosting demand for higher-yielding currencies.

The dollar gained versus Japan’s currency after Federal Reserve Chairman Ben S. Bernanke said the U.S. recovery is moving at a “moderate” pace and he sees consumers in the world’s largest economy “coming back.” The euro rose after yesterday touching a four-year low against the dollar and reaching its weakest in more than eight years versus the yen on speculation Europe’s common currency has fallen too rapidly.

“Bernanke’s comments have had a soothing effect on markets after what’s been a pretty bleak few sessions,” said Tim Waterer, a foreign-exchange dealer with CMC Markets in Sydney. “The mood on Asian equities is a bit calmer and that’s allowed some of the currencies that have been heavily hit, like the euro and Aussie, to eke out gains.”

The yen fell to 91.85 per dollar as of 10:43 a.m. in Tokyo from 91.37 in New York yesterday. Japan’s currency weakened to 109.85 per euro after touching 108.08 yesterday, the strongest since November 2001. The euro traded at $1.1961 from $1.1923 in New York yesterday, when it sank as low as $1.1877, the weakest since March 2006.

08:08 Tuesday 8 June, 2010

Investors should hold on to their bets that the pound will decline against the dollar even after the currency advanced against its major counterparts in recent weeks, according to JPMorgan Chase & Co.

The pound will fall after it failed to break above a key resistance level of $1.48, wrote JPMorgan currency technical analyst Niall O’Connor. The bank has forecast sterling will drop to $1.35 by the end of the year.

“We continue to hold on to short positions looking for a break to new lows,” O’Connor wrote in an e-mailed note received today. “We continue to view the advance in the pound/dollar from the May low as a corrective phase within a medium-term downtrend.”

The pound has risen 2.52 percent in a month, according to Bloomberg Correlation-Weighted Currency Indexes. The currency, which gained 0.6 percent against the dollar in the past two weeks, traded at $1.4510 as of 1:25 p.m. in London today.

08:06 Tuesday 8 June, 2010

A gauge of risk has surged to the highest level in 15 months, signaling investors are reversing strategies of borrowing money in countries with low interest rates to invest in high-yielding assets, Barclays Plc said.

The Barclays Capital Carry Unwind Risk Index rose to 52.8, breaking the 50 threshold for the first time since March 2009, according to Aroop Chatterjee, a Barclays currency strategist in New York. The index seeks to forecast the probability of future unwinds of carry trades in G-10 currencies, according to a note emailed to clients today.

“The recent run-up in the carry unwind risk index has been driven by widening in risk spreads, rising price of risk and worsening sentiment towards risky currencies,” Chatterjee wrote in the note. “This is the level at which the index signals significant risk of a sharp sell-off in carry strategies.”

An unsteady U.S. recovery, increasing volatility and the euro zone fiscal crisis are driving investors into safer assets, especially in the realm of foreign exchange, according to Chatterjee.

“The broader risk environment has worsened in past weeks,” he wrote.

08:03 Tuesday 8 June, 2010

The euro may slide to around 104 yen in the coming weeks and to as low as 100 between early September and October if it breaks below an almost 10-year low reached today, according to at BNP Paribas SA.

The euro touched 108.08 yen today, the weakest since November 2001. That level represents a 23.6 percent Fibonacci retracement of the common currency’s rally from October 2000, a break below which means it will continue the slide that began in April as Europe’s sovereign-debt crisis drove investors to the safest assets, according to Andrew Chaveriat, a technical analyst at BNP in New York.

“This current decline probably has a little bit more downside over the next few weeks,” Chaveriat said in an interview. “The ominous thing is that if we start getting below this 105 area then there’s not too much support because we’ve blown through the last retracement levels.”

07:59 Tuesday 8 June, 2010

The euro fell to a four-year low against the dollar as a slump in global stocks raised concern about the sustainability of the economic recovery even with a report showing German factory orders unexpectedly increased.

The yen gained against all 16 of its most-traded counterparts as investors sought a refuge while shedding higher- yielding assets. Canada’s dollar was the second-best performer as oil, the nation’s biggest export, pared losses.

“The data was not enough to prop up the euro,” said John Doyle, a strategist at currency-trading firm Tempus Consulting Inc. in Washington. “Until the European debt crisis cools somewhat, the data will continue to be overlooked. Every time you see stocks fall, people are shedding riskier assets.”

The euro depreciated 0.4 percent to $1.1923 at 5 p.m. in New York, from $1.1967 on June 4. It earlier fell to $1.1877, the weakest level since March 2006, and gained to $1.1992. Europe’s common currency dropped 0.9 percent to 108.95 yen, after earlier sliding 1.7 percent to touch 108.08 yen, the lowest since November 2001. The greenback fell 0.6 percent to 91.37 yen, from 91.9 on June 4.

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