The US dollar fell vs. most major currencies with the release of mixed domestic data. An IMF report showed that the dollar's share of global currency reserves fell in the second quarter to 62.8%, from 65% the first quarter. The IMF cut its projection for global writedowns on loans and investments by 15% to $3.4 trillion. ADP employment showed that companies cut payrolls by 254,000 jobs in September, worse than forecasts of 200,000. The Chicago purchasing manager's index came in at 46.1 in September, down from 52.0 the previous month. The final reading of the second quarter gross domestic product showed the US economy shrank 0.7%, beating forecasts of a 1.2% fall but highlighting the recovering remains patchy.
The euro appreciated against the dollar after the European Central Bank said it will lend European banks $110 billion for 12 months at the current benchmark rate of 1% to aid the economic recovery. The unemployment rate in Germany, Europe's largest economy, was 8.2% in September, beating forecasts of 8.4%.
The British pound rose modestly against the dollar with improved signs of a global economic recovery. The index of services improved to -0.2% the past 3 months, better than the 0.6% fall during the previous period.
The Japanese yen gained against the dollar as analysts said the Bank of Japan may decide to let its emergency corporate debt buying program expire. Improvement in the global economy has helped businesses regain access to private funding. Finance Minister Hirohisa Fujii said that Japan wouldn't bring up the issue of yen strength at the G7 meeting in Istanbul. Industrial production improved to -18.7% in August from -22.7% the previous year. Housing starts fell 38.3% in August year over year, worse than forecasts of a 31.7% fall.
The Canadian dollar appreciated against the dollar as commodity prices moved higher. Statistics Canada said that the gross domestic product was unchanged in July from a month earlier, lower than forecasts of a 0.5% gain. Bank of Canada Governor Mark Carney said that policy makers will hold their key interest rate at a record low of 0.25% through June 2010, depending on the outlook for inflation.
The Australian and New Zealand dollars both strengthened to their highest level against the dollar since August 2008. Positive data from both countries added to speculation that their central banks will raise interest rates. Business confidence in New Zealand improved as 32.2% of companies surveyed this month expected profit and sales to rise over the next 12 months, up from 26% in August. Retail sales in Australia climbed 0.9% in July, from a revised 0.5% the previous month. Approvals to build private houses were up 3.1% this month. Interest rates are 3% in Australia and 2.5% in New Zealand, compared to near zero in the US and Japan, which is attracting investors to higher-yielding currencies. A rise in commodities has also helped the Aussie appreciate.
10-Year Treasury Note Yield: 3.2924%
Dow Jones Industrial Average: 9,663.23 -78.97