v USD broadly weakens as Labor Department showed weekly jobless claims rose;

v World's major central banks acted jointly to boost dollar liquidity for European banks;

v Global manufacturing activity sank lower last month, pulled down by factories in Europe and Asia.  

The US Dollar weakened slightly across most of the major currencies with the exception of the JPY and AUD. This comes after the Labor Department showed US weekly jobless claims rose to 402,000 in the latest week, which was much higher than the forecast of 390,000. The department said 21 states reported an increase in claims with California leading the pack with 19,220. Challenging the jobless claims data, is the rebounding US factory activity which hit its highest reading since June this year. The Institute for Supply Management said its purchasing managers' index rose to 52.7 in November, up from 50.8 in October. New orders, production, prices, and exports have all improved and supported the better than anticipated reading. Market reaction to the recent data was mixed as US stock indexes firmed, US bond prices rose slightly, and the US dollar broadly weakened.

The euro climbed higher against the USD after the world's major central banks acted jointly to boost dollar liquidity for European banks which earlier urged EU ministers to seek IMF assistants to avoid a financial disaster. The coordinated action made by the U.S. Federal Reserve, the European Central Bank, and the central banks of Japan, Britain, Canada and Switzerland lowered the cost of existing dollar swap lines by 50 basis points from Dec. 5 and was aimed to prevent credit markets from seizing up. Europe's debt crisis has significantly worsened since 2008 and has proven to be major concern for global economic stability. In the short-term, economists expect the ECB to cut interest rates and announce cheaper longer-term liquidity tenders and ease down collateral rules.

 

Sterling traded flat against the USD after a purchasing managers' survey showed British manufacturing activity shrank for a second straight month. The manufacturing-headline index dropped to 47.6 in November from 47.8 in October. Despite the weaker export demand, lower input costs have translated to the lowest output price rate in 25-months, reassuring the forecast of decreased inflationary pressures in the coming months.

The Japanese yen improved against the USD as risk adverse investors seek sanctuary after global manufacturing activity sank lower last month, pulled down by factories in Europe and Asia. The Global Manufacturing PMI, produced by JPMorgan, fell to 49.6 in November from October's 49.9.

The Commodity Currencies all continued their push higher with the Canadian dollar gaining against the greenback for a fourth straight day. While the Australian and New Zealand dollars pushed higher holding onto gains despite China's PMI narrowing to 49.0 down from 50.4 from the previous month. Markets had become concerned that Beijing's economy was slowing fast after China's surprise easing of bank reserve requirements yesterday.

Look for commodity currencies to remain well supported ahead of tomorrow's employment release from Canada where expectations are for job gains of 17.5K in November with unemployment coming in at a 7.3%.

12/01/2011

CURRENT

CHANGE FROM CLOSE

EUR/USD

1.3475

0.22%

USD/JPY

77.66

-0.06%

GBP/USD

1.5688

-0.10%

USD/CAD

1.0173

0.01%

USD/SEK

6.7659

-0.05%

USD/MXN

13.6058

0.13%

USD/CHF

0.9158

-0.29%

AUD/USD

1.0220

-0.60%

NZD/USD

0.7772

-0.42%

USD/ZAR

8.0804

0.20%

USD/CNY

6.36665

0.20%

10-Year Treasury Yield:

2.0855

0.0141

Gold:  

 $ 1739

$ (6.50)

Copper:  

 $ 351.85

 $ (4.45)

Crude Oil: 

 $ 99.16

$ (1.21)

DJIA:

12,009.77

-35.91

 

---

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.