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USD - Significant data releases and a holiday-thinned market last week conspired to create heightened volatility for currency markets, and in particular, the US dollar. A series of sanguine economic data sparked investor risk appetite, causing the greenback to lose ground leading up to the Thanksgiving holiday: Consumer Confidence (49.5 in Nov. vs. 47.3 exp.); Initial Jobless Claims (466K for 11/21 vs. 501K prior); U. of Michigan Confidence (67.4 in Nov. vs. 66.0 prior); Q3 GDP (2.8% vs. 2.8% exp.). However, disappointing Durable Goods Orders (-0.6% in Oct. vs. 2.0% prior), together with the shocking news out of the United Arab Emirates concerning Dubai World's request for an extension to repay loans of up to $60B, roiled markets resulting in a "flight-to-quality" response to the USD. Financial markets are returning to some semblance of normalcy this morning as trading volume has increased and the debacle with Dubai World has ostensibly been resolved (a standing agreement with creditors to extend loan maturities until at least May 30, 2010). Consequently, the USD has once again become a favored currency for the "carry trade" in which investors borrow in the low-yielding USD to fund its investments in other higher yielding assets and currencies. This morning's better-than-expected Chicago PMI release (56.1 in Nov. vs. 53.0 exp.) further exacerbated the dollar's precipitous decline, causing it to drop to multi-week lows vis-à-vis the EUR, GBP, CHF, AUD, and NZD. Markets will be closely attuned to this Friday's NFP report and Unemployment Rate announcement. With US equities still hovering near the highs of the year (DJIA at 10,310.00), Gold trending ever-higher ($1173/oz), and US interest rates remaining at historic lows, the USD will likely continue to remain under pressure into the foreseeable future.
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