The U.S. dollar is slightly weaker this morning as investors return to riskier trades following a 6th day of positive growth in global equity indices. A strong start to U.S. corporate earnings season also boosted general appetite for risk, while data showing the U.S. trade deficit unexpectedly widened 4.8% to $42.8 billion in May, weighed on the dollar. This trade data out of the U.S. renewed focus on the United States' own budget concerns, though markets still expect the U.S. economy to outpace its counterparts in Europe and Japan when it comes to growth. Growth expectations should continue to support the dollar against the euro in the long term.
The euro fell to 1-week lows following news that Moody's Investors Service cut Portugal's rating by two notches. It later reversed its losses after a smooth Greek Treasury bill auction helped ease some concerns about Europe's debt crisis. It is currently sitting at fresh 2-month highs against the USD.
Greece's Public Debt Management Agency (PDMA) sold 1.625 billion euros ($2.03 billion) of 6-month T-bills on Tuesday at a cheaper cost than it pays to borrow under its 110 billion euro EU/IMF rescue fund, and marking its first debt auction since the backstop was agreed in May.
The sterling extended gains, climbing 1% against the dollar on speculation that data showing high UK inflation may add to the argument for an interest rate increase before the anticipated Q2 2011 date. Sterling has rallied in the past month as optimism that strict measures to cut the UK budget deficit will improve Britain's fiscal position.
The Canadian dollar surged against its U.S. counterpart as riskier assets garnered bids after Greece successfully returned to capital markets for the first time since a massive bailout package in May. Breaking through the significant 1.03 barrier and supported by the markets appetite for risk the loonie should remain firm.
As with the USD, the Japanese yen took the brunt of the losses for the day as traders moved to riskier assets.
The Australian and New Zealand dollars continue to remain near their 1-month peak with increased risk appetite in the market. New Zealand markets await June housing data and May month retail sales tomorrow, ahead of second quarter inflation figures on Friday.
10-Year Treasury Note Yield: 3.106%
Dow Jones Industrial Average: 10,368.24 +151.97%
This market summary is prepared by Union Bank's Global FX Department for the general information of its customers. It is based on the most accurate information currently available, but should not be considered investment advice or a guarantee of future exchange rates or trends.