The US Dollar is mixed this morning as the risk-on rally seen in global financial markets over the past two day begins to wane. While it appears that financial leaders are committed to supporting the global economy, investors are concerned that their actions are too little too late, and that a double-dip recession is all but inevitable at this point. However, businesses appear to be looking beyond the current turmoil, and have a better outlook for the future of the economy than most economists do. Orders of durable goods, products meant to last three years or more, fell by less than expected, posting a reading of -0.1% versus an expected -0.2%, indicating that businesses are planning to grow in the coming months. With the conflicting evidence for the economy, the dollar has been relegated to its recent ranges against most of its major counterparts with support derived from its role as a safe-haven asset.

The EUR has pulled back from earlier gains to a weekly high near 1.37 despite apparent progress on reaching a plan to backstop faltering Eurozone governments. The EUR gained against most of its major counterparts, and remains higher against the USD for a fourth straight day after the EU proposed a financial transactions tax and Finland's parliament approved the expansion of the region's bailout fund. It appears that Eurozone leaders are considering a TARP-style plan, allowing the European Investment Bank to borrow money from the EFSF to create a SPV that will purchase sovereign debt from member nations like Greece and Spain. However, the complex structure has significant implementation risk, and it still fails to address the problems plaguing insolvent nations. Moreover, with the plan transferring risk to the solvent Eurozone members, it remains to be seen how willing German taxpayers are to accepting further bailouts.

Sterling is relatively flat this morning as stocks and commodities gyrate between gains and losses. Investors were relatively encouraged by apparent progress on a plan to sure up the financial sector in the Eurozone. However, the continued flow of disappointing economic news in the UK has kept the pound near its lowest levels of the year against the dollar. Data yesterday showed that orders for British exports declined to the lowest levels in more than a year as global demand slows - a particularly troubling report with the GBP at relatively weak levels.

The JPY has strengthened overnight, but has pulled back from its highs. The yen had initially gained on reports that Eurozone nation's were pushing Greek bondholders to accept larger writedowns, prompting safe-haven flows into the JPY, but offsetting reports that the EU leaders are working on a TARP-style plan have reduced the yen gains. Until a concrete plan is put into place to deal with Greece's struggles with debt, the yen will remain well supported as a proxy for market risk.

The Commodity Currencies are mixed this morning with the CAD, AUD and NZD all lower, while the ZAR posted a modest gain. Oil pared yesterday's sharp gains, falling to $83/bbl, gold was down to $1643/oz and copper fell to $331/lb. The CAD extended its recent declines, heading for a monthly and quarterly loss against the USD on the falling price oil, Canada's main export, and a dimmed outlook for the US economy, Canada's largest export market. Investors will pay particularly close attention to Canadian GDP data due this Friday with a modest gain of 0.3% expected. The AUD and NZD pared some of their recent rebound this morning on the continued weak outlook for the global economy. Data out of New Zealand yesterday showed that exports out of the South Pacific nations are in fact slowing, while imports unexpectedly increased. New Zealand Finance Minister, Bill English, told reporters that revenue from exports will likely decline in the coming months both as overall export volumes fall and as unsustainably high commodity prices ease. The ZAR was the only gainer of the group, again posting the best gains over the USD on the improved immediate outlook for the Eurozone economies, the main destination for South African exports. The rand's relatively high yield has also attracted investors with other global central banks looking to ease monetary policy.

09/28/2011

CURRENT

CHANGE FROM CLOSE

EUR/USD

1.3630

-0.33%

USD/JPY

76.50

-0.41%

GBP/USD

1.5644

-0.06%

USD/CAD

1.0223

0.29%

USD/MXN

13.3777

0.09%

USD/CHF

0.8955

-0.07%

AUD/USD

0.9901

0.14%

NZD/USD

0.7856

0.37%

USD/ZAR

7.7989

-0.88%

USD/CNY

6.3940

-0.07%

10-Year Treasury Yield:

2.0529%

0.0818

Gold:  

 $ 1,641.10

 $ (9.50)

Copper:  

 $ 331.20

 $ (11.75)

Crude Oil: 

 $ 83.38

 $ (1.07)

DJIA:

11,258.59

66.83

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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..