The US dollar fell vs. most major currencies as data showing that the Eurozone pulled out of a recession increased risk appetite for higher-yielding assets. The dollar was hurt as the University of Michigan Confidence index of consumer sentiment fell to 66 in October, much lower than forecast increase to 71. The US trade deficit grew to $36.5 billion in September, higher than forecast growth to a $31.8 billion deficit.
The euro rose against the dollar as the Eurozone grew out of a recession. Eurozone gross domestic product grew 0.5% in the third quarter, much higher than a 0.2% fall the previous quarter. The gross domestic product in Germany, Europe's largest economy, also grew 0.7% from a revised 0.4% growth. Though the growth in the gross domestic product was lower than expected, investors saw this data as signs of improvement in the economy.
Sterling rose against the dollar as a planned merger of British Airways and a Spanish airline spurred speculation that the economy is improving. As there are signs of domestic economic improvement, demand for the pound will increase.
The Japanese yen gained against the dollar as concern eased that Japan may have trouble financing its budget deficit. Finance Minister Hiroshisa Jujii previously stated that maintaining the trust of investors in the government bond market is our priority. Also helping the yen are Japanese investors repatriating money from their US fixed-income investments. Data showed that industrial production grew 2.1% in September and that consumer confidence was 40.8 in October.
The Canadian dollar was stronger against the dollar even as crude oil prices fell. An increase in exports helped to more than halve the Canadian deficit to $927 million from $2 billion in August. This was also much lower than expectations for a $1.8 billion deficit.
The Australian and New Zealand dollars both strengthened against the dollar as there was increased demand for higher-yielding assets. House prices in New Zealand rose 1.3% in October, and the number of properties sold rose 36% from a year earlier. Traders have increased bets that the Reserve Bank of New Zealand will raise interest rates by at least 2% over the next 12 months.
10-Year Treasury Note Yield: 3.4345%
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