The US dollar held gains on risk aversion after U.S. durable goods orders fell for a six straight month to a six-year low in January. At the same time, jobless benefit claims jumped to a new record high in the second week of February, indicating more workers were on U.S. state unemployment rolls. Weak fundamentals and pessimism continue to favor buying the dollar as a safe haven currency. The U.S. housing sector continues to deteriorate and more job layoffs are expected. Yesterday, existing home sales unexpectedly fell to a new record low in January.
The Japanese yen weakened further as its currency loses its safe haven status on worries about Japan's deteriorating economy. A weaker yen should help Japanese exporters. Meanwhile, Japanese exports plunged a record 45.7 percent in the same month compared to a year ago hurt the yen. The yen is expected to trade at weaker levels in the next few days.
The euro softened as German exports dipped 7.3 percent in the fourth quarter, hurting gross domestic product, which dropped 2.1 percent last quarter. The European Central Bank is expected to cut rates next week, but not below 1 percent. Euro zone interest rates are currently at 2 percent.
The British pound rose, benefiting from talk that the UK government plans to insure banks' toxic assets in an attempt to spur lending again. Meanwhile, recent grim data suggests further UK monetary easing next month.
The Canadian dollar remains supported by hope that policy makers are doing their best to rescue banks and avoid nationalization. Bank of Canada is expected to cut rates by another 50 basis points to 0.50 percent on March 3.
The New Zealand dollar softened slightly following a slide in business confidence data in New Zealand. News of better than expected business investment in Australia provided the Australian dollar a boost. Australian capital spending jumped 6 percent in the fourth quarter of 2008, reducing the chance of a rate cut in Australia on March 3. However, a rate cut is still expected in New Zealand on March 12.
The Mexican peso fell close to record lows on concern that the U.S. economy is getting deeper into a recession. Mexico's economy will be hurt if exports to the U.S. slow because Mexico has close trade ties with the U.S.
10-Year Treasury Note Yield: 2.99%
Dow Jones Industrial Average: 7,361.61 +90.72