The US dollar rose vs. most major currencies as Chinese Premier Wen Jiabao said that the world economy faces a bumpy recovery, discouraging demand for higher-yielding assets and heightening risk aversion. The Chinese Premier did not make any comments about the dollar peg, but the Chinese central bank triggered speculation yesterday that the yuan may rise as it dropped a pledge in its monetary-policy report to keep it basically stable. US Treasury Secretary Timothy Geithner said from Singapore that it was very important that the US maintains a strong dollar. Initial jobless claims in the fell to 502,000, beating forecast of a fall to 510,000. Continuing claims fell to 5,631,000 from a revised 5,770,000 previously.
The euro fell against the dollar as there was a fall in risk appetite after discouraging statements from the Chinese Premier about the world's economic recovery. Industrial production in the Eurozone rose 0.3% in September, lower than forecast growth of 0.5%. A stronger euro may threaten the economic recovery in the Eurozone as exports become more expensive.
Sterling traded lower against the dollar as Bank of England Governor Mervyn King said yesterday that a weaker currency will help the UK recover from its recession. King also signaled that the central bank's 200 billion pound asset-purchasing program may continue to be extended. The unemployment rate was 7.8% in September, lower than forecast 8.0%.
The Japanese yen fell against the dollar as statements from the parliamentary secretary of finance in Japan supported the dollar. Shinichiro Furumoto said that Japan supports a strong dollar and doesn't intend to reduce its holding of US Treasuries or buy more gold. The parliamentary secretary of finance made this comment in a group interview after attending a meeting of finance ministers from the Asia-Pacific Economic Cooperation group.
The Canadian dollar weakened against the dollar as gold prices retreated from record highs and crude oil prices dropped below $78 per barrel. New home prices rose 0.5% in September, beating forecasts of 0.2% rise.
The Australian and New Zealand dollars both fell against the dollar with poor domestic economic data and commodity prices fell. In Australia the unemployment rate grew to 5.8% in October from 5.7%. Retail sales in New Zealand grew 0.2% in September month-over-month, lower than forecast growth of 0.4%. The Reserve Bank of Australia meets next on December 1 and is forecast to raise interest rates by 0.25% from its current 3.5%. The Reserve Bank of New Zealand has announced that it would not start increasing rates from its current 2.5% until the second half of 2010 earliest, citing weakness in the economy. There may start to be some divergence between the two currencies if the central banks differ in rate changes.
10-Year Treasury Note Yield: 3.4569%
Dow Jones Industrial Average: 10,240.39 -50.87