The US dollar rose against a basket of currencies following Iran's plan to reduce euro holdings. According to an Iranian governmental newspaper, Iran's central bank will sell 45 billion euros to purchase gold and dollars and increase its oil sales in dollars in place of euos. Meanwhile, the National Association of Realtors reported a growth in home sales of 6.0% in April, an increase from a forecasted 5.0% growth.

The euro weakened against the dollar to a 4 year low after the release of Europe's unemployment data. The European Union's statistics office reported that the jobless rate increased to 10.1% in April, the highest rate since June 1998. The European Central Bank reported that banks in Europe may need to write off more loans this year than in 2009.

The British pound eased gains from an earlier rally against the dollar following UK Prudential's failed merger with AIG's Asian life insurance business.  Earlier expectations that the acquisition was headed for collapse drove the pound into a 2 week high against the dollar and a 4 month high vs. a basket of currency. Since the announcement, the sterling eased back to trade flat vs. the dollar.

 

The Japanese yen weakened to a 2 week low following the resignation of Japanese Prime Minister Yukio Hatoyama. His potential successor, Finance Minister Naoto Kan had said in the past that he preferred a weaker yen. Recently, the yen has been favored for its safe haven reputation, but analysts are concerned that Japan's political instability will weigh down the currency.

The Canadian dollar strengthened against the US dollar and outperformed other commodity linked currencies. While risk aversion remains high, the loonie's economic fundamentals have led investors to believe the currency will rise towards parity with the US dollar. The loonie is stronger amid the rising crude oil prices and yesterday's interest rate increase of 0.50% from the Bank of Canada.

The Australian and New Zealand dollars weakened vs. the US dollar following reports from the Reserve Bank of Australia that interest rates will remain at 4.5%. Weaker than expected Australian housing data leads to speculation that the RBA may leave interest rates unchanged for the coming months ahead.

Indicative rates:

EUR/USD

1.2235

USD/JPY

91.95

GBP/USD

1.4645

USD/CAD

1.0390

USD/MXN

12.8590

USD/CHF

1.1620

AUD/USD

0.8310

NZD/USD

0.6751

10-Year Treasury Note Yield:  3.309%

Dow Jones Industrial Average:  10,118.79 - +0.89%