The US dollar weakened vs. most major currencies as investors' risk appetites increased due to the Obama administration mortgage plan and the upcoming G7 meeting. The mortgage plan is for the US government program to help subsidize mortgages to stem the mortgage delinquencies. The new program would help the existing mortgage companies' infrastructures rather than creating a new one. The program will subsidize existing mortgages, helping homeowners with their loans before they fall behind in their payments. Current programs only assist borrowers that are already delinquent. The administration may also lower the requirement for those who would be eligible for relief.
The yen weakened today as hopes of a US government program to subsidize mortgages took investors out of the risk-averse currency.
The euro fell slightly after data showed that the GDP shrank -1.5% from the previous quarter, worse then forecast -1.3%. The Euro-zone's biggest economy, Germany, shrank a bigger-than-expected -2.1% quarter-on-quarter. French GDP fell -1.2% and Italy fell 1.8%. This is the deepest recession for the Euro-Zone since the end of World War II.
The British pound strengthened slightly as investors squared their short positions ahead of the G7 meeting this weekend in Rome. Investors expect the finance chiefs to discuss the currency's current weakness. The sterling was kept in check with news that Lloyd's Banking Group has a 8.5 billion pound loss related to its HBOS subsidiary.
The Australian dollar strengthened after a $27.4 billion stimulus package was passed by parliament, raising hopes that the country can avoid a recession. With the stimulus package passed, the Reserve Bank of Australia is less likely to cut interest rates by more than 0.50% next month from the current 3.25%. Meanwhile, the New Zealand dollar was steady as with weak economic data pared gains from an increase in investor risk appetite. Retail sales volumes dropped -0.6% in January from the previous quarter. House prices are also down 4.6% from the previous year.
The Canadian dollar rallied against the dollar as investor appetite for risk returned with the US government mortgage plan.
10-Year Treasury Note Yield: 2.877%
Dow Jones Industrial Average: 7,959.76 +27.0