The US dollar slid further against most major currencies after report showed new home-building fell more than expected in December. The Commerce Department reported housing starts fell 4.3% to an annual rate of 529,000 units, down from 553,000 in the previous month of November and the lowest level since October 2009. Meanwhile, building permits jumped 16.7% to 635,000, surpassing a forecasted 560,000 and the biggest leap since June 2008. An increase in permits gave way to optimism for the future in the housing sector but foreclosure filings and continued high unemployment may further discourage construction in the near term.

The euro hit an 8-week high against the USD as hopes that Eurozone policymakers would prevent the debt crisis from spreading beyond Greece and Ireland. Further, investors have been encouraged in the recent couple days after Russia joined Japan and China in expressing interest in buying new bonds from the European Financial Stability Facility (EFSF) rescue fund. Meanwhile, the Economy Ministry raised Germany's growth forecast for 2011 to 2.3% from a previous estimate of 1.8%. The ministry forecasted exports to rise 6.5% while imports would gain 6.4% for this year.

Despite euro's gains, some analysts remain wary that European officials may not have strong enough measures to prevent the Eurozone debt crisis from spreading, which may limit further gains past key levels for the euro.

The British pound gained slightly against the USD and fell against the euro after data showed Britain's labor market grew weaker. The Office for National Statistics reported unemployment rose at the highest rate in 8 months in November, suggesting the recovery lost steam in late 2010. The reports proved even less promising for 2011 as the government expects to cut 330,000 public sector jobs over the next four years.

The Japanese yen gained further against the USD despite warnings made by Japanese vice finance minister, Fumihiko Igarashi, who said Tokyo was ready to act against the currency's rapid movements. The yen has been gaining steadily against the dollar, surpassing levels seen before Japanese officials intervened in the currency market on September 15.

The Canadian dollar traded higher against the broadly weaker USD after a rally in global equity and commodity markets. World stocks hit their highest level in nearly two and a half years and 4th qtr corporate earnings boosted confidence in the economic recovery. Meanwhile, the price of oil, a key Canadian export, rose to near $92 a barrel and copper hit a record high at $9,781/ton. A weaker US dollar supports prices for dollar-linked commodities as it becomes cheaper for holders of other currencies.

The Australian and the New Zealand dollar reached a 2-week high against the thinly traded USD as commodity prices rose and optimism about the global recovery heightens. A news release reported a slowdown in Chinese inflation which reduces the need for aggressive monetary pricing. A stable growth in the region is a positive sign for the Aussie and Kiwi as China is a major export market for Australia.

 Indications of Overnight rates:

EUR/USD

1.3530

USD/JPY

81.65

GBP/USD

1.6021

USD/CAD

0.9909

USD/MXN

12.0669

USD/CHF

0.9549

AUD/USD

1.0065

NZD/USD

0.7752

10-Year Treasury Note Yield: 3.333%

Dow Jones Industrial Average: 11,832.60 - 0.05%

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.