Technicals

The Dollar rose versus the Euro in thin trade on Friday as volatile equity markets and fears of a deepening global recession led investors to seek the US currency as a haven. Extreme risk aversion and repatriation flows have been supporting the US currency recently. Selling pressure on the Euro also mounted, with the single currency also falling against the Yen and Sterling on growing expectations that slowing euro-zone inflation may lead policy makers to cut rates more aggressively this week from the current 3.25%. Some analysts and traders also mentioned sizable month-end Dollar buy-orders at the London currency fixing (1600 GMT) added support to the US currency.

Trading volumes were lower than usual as US markets reopened for only half a day after the Thanksgiving holiday. In thin trading, EurUsd was 1.48% down at 1.2701, after briefly trading as low as 1.2646. EurJpy dropped 1.38% to 121.36. UsdJpy was little changed at 95.37 or 0.19% lower. GbpUsd was unchanged at 1.5408. UsdChf rose 1.09% at 1.2137 having posted 1.2200 intraday high.

Looking ahead to this week, markets are bracing for interest-rate decisions by several central banks, including the Bank of England, the European Central Bank, the Reserve Bank of Australia and the Reserve Bank of New Zealand. Investors refrain to build new large positions ahead of these meeting buy Japanese currency looks set to hold its broad strength in case any central banks surprise with larger cuts than forecast, which would further erode the interest rate advantage of their currency against the low yielding Yen.

US automakers are due to report on Tuesday their November US sales, which are expected to have dropped by some 30% from a year earlier. US law makers are soon reviewing restructuring plans submitted by the US automakers and consider their request for a $25 billion rescue plan.