The US dollar rebounded vs. most major currencies as the optimism stoked by Australia's interest rate-hike yesterday dissipated. Overnight the dollar came under heavy pressure as Australia's rate hike bolstered expectations the global economy was recovering, fueling a rally in stocks worldwide.
The euro lost steam as the Eurozone's economy shrank more than expected in the second quarter. The European Union Statistics office reported gross domestic product fell by 0.2% in Q2, and 4.8% in annual terms. Many analysts had forecasted a 0.1% decrease, but remain optimistic that the Eurozone will grow in the third quarter. Economy Ministry data showed German manufacturing orders rose for the sixth consecutive month in August, posting a 1.4% increase.
Sterling hit a five-month low after yesterday's surprising fall in UK manufacturing output cast a negative light on the currency. Although there is negative sterling sentiment in the market, Britain's sentiment of their present circumstances, future prospects and willingness to spend has reflected an improvement. Data from the Nationwide Consumer Confidence Index rose to its highest in 17 months in September reaching 71.
The Japanese yen strengthened to an eight month high vs. the dollar but soon erased those gains as risk-aversion was brought to the forefront of investors. Japan's Finance Minister Hirohisa Fujii said he was quietly watching currency markets move but may intervene if market movement becomes abnormal. On the data front, the index of leading economic indicators rose 0.8% to 83.3, increasing for the sixth consecutive month.
The Canadian dollar remained steady against the US dollar as risk appetite increased and commodity prices held steady. Oil prices hit $71 a barrel as demand recovers, while gold prices hit a record high as the greenback weakens.
The Australian and New Zealand dollars held near 14-month highs as investors forecasted further interest rate hikes later this year. With stronger equities, higher oil and gold prices, the Aussie and Kiwi has held on to its week long rally against the greenback.
10-Year Treasury Note Yield: 3.202%
Dow Jones Industrial Average: 9,687.49 - 43.76
This market summary is prepared by Union Bank's Global FX Department for the general information of its customers. It is based on the most accurate information currently available, but should not be considered investment advice or a guarantee of future exchange rates or trends.