The U.S. dollar plummeted to its weakest level against the euro in nearly 3-months due to technical trading and month end positioning. Favorable data out of the euro zone is helping to drive the euro higher in sharp contrast to recent weak data out of the U.S., which has weighed broadly on the dollar. Investors are mindful of figures on Friday which are expected to show slower economic growth in the country in the second quarter.  

Some analysts said California Governor Arnold Schwarzenegger's announcement that the state was in a state of emergency over its finances was another reason to dump the dollar as it highlighted the country's fiscal problems.    

The euro remained supported by firm euro zone data, with today's figures showing euro zone economic sentiment jumping to a 28-month high. Meanwhile German unemployment declined for the 13th consecutive month.  Juxtaposed against the USD and its steady stream of negative economic news, investors have pushed the euro nearly 7% against the USD this month. The next technical level for the euro will be $1.3125.

The British pound remained at a 5-month peak against the dollar, well supported by optimism about the UK economic outlook after a run of encouraging data. The pound has climbed more than 4% this month versus the dollar, which by contrast has suffered broadly on signs the U.S. economic recovery is losing steam.

Today's weak housing data was largely ignored by the market as UK mortgage approvals came in below expectations, following a softer Nationwide house price survey.

The Canadian dollar edged higher, breaching 3-month peaks against the greenback, boosted by rising North American equity futures, firm commodity prices and broader U.S. dollar weakness.

Currency players also took their cue from a report that a Moody's official said the U.S. government needs to provide a credible plan to address its rising debt profile in order to maintain its top-notch credit rating.

The Japanese yen is once again nearing multi-month highs against the USD as investors flee the dollar on the back of ongoing negative economic outlook.

The Australian and New Zealand dollars rose more than 1% recovering from a sharp fall yesterday following weak inflation data, to take it back close to an 11-week high.  The New Zealand dollar rose after the central bank raised interest rates by a quarter point, as widely expected, but warned that further hikes could be more gradual.  

Indications of Overnight rates:

EUR/USD

1.3106

USD/JPY

86.75

GBP/USD

1.5581

USD/CAD

1.0299

USD/MXN

12.6433

USD/CHF

1.0299

AUD/USD

0.9042

NZD/USD

0.7286

10-Year Treasury Note Yield:  2.970%

Dow Jones Industrial Average:  10,435.29 -62.66

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.