EUR rose after the ECB left interest rates unchanged.
USD/JPY is back on the defensive and trades comfortably above 88.00.
USD –The US dollar slid lower against most major currencies, as world stock prices rose to an eight-month high after news of stronger-than-expected Chinese exports raised hopes of a more robust recovery for the global economy this year. Adding pressure to the USD was also the release that more Americans than forecasted filed applications for unemployment benefits last week. Jobless claims increased by 4,000 to 371,000 in the week ended Jan. 5, a sign that improvement in the labor market remains frail to say the least. Meanwhile, inventories at US wholesalers rose more than forecasted in November as many companies prepared for the surge in demand from the holiday shopping season, which some analyst believed had lackluster results. The boost in sentiment today supported higher-yielding currencies as investors moved away from safe-haven positions.
EUR –The euro rose against the USD after the European Central Bank left interest rates unchanged and ECB President Mario Draghi offered no hints that more policy easing will be coming soon. Spain's first debt sale of 2013 raised more money than expected at a lower borrowing cost than in a previous auction, sending benchmark Spanish bond yields to 10-month lows. In addition, the euro gained an extra boost after Spain's debt auction raised 5.8 billion euros. The combination of an improved global economic outlook and reduced worries about Spain's ability to finance its deficit added the majority of support for the currency today.
GBP – Sterling rose against the dollar after the Bank of England kept monetary policy unchanged as expected. The BoE's Monetary Policy Committee (MPC) said its main interest rate would stay at a record low 0.5% and it would not buy any government bonds on top of the 375 billion pounds ($600 billion) purchased so far. While consumer spending and output in the UK continues to stagnate, implying a growing amount of spare capacity in the economy and keeping expectations of further monetary policy easing in coming months, inflation remains above target. Stubborn inflationary pressures would make the BoE's task of easing monetary policy tougher, offering some support to the British pound.
JPY – The Japanese Yen is back on the defensive against the USD, weakening further than its previous level while giving up most of its gains made earlier this week. The expectation of the BoJ to adopt a more forceful monetary stimulus measure to boost the economy kept the yen restrained, driving sharply lower in recent months and dropping nearly 12% against the USD since November. The market remains uncertain about the yen before the BoJ's policy meeting on January 21-22. Slipping 0.3% from yesterday's close, the yen is trading comfortably above 88.00.
Commodity Currencies– Commodity Currencies firmed against the greenback as the stronger-than-expected Chinese exports boosted growth-linked currencies. China surprised most observers by reporting its exports rebounded sharply in December to a seven-month high, with imports growing at double the expected rate. A broad measure of Chinese credit growth was also found to have risen strongly, making it likely that the economy will be showing an expansion of around 7.8% in 2012, when Q4 GDP data comes out next week. The strength of imports revealed in the data stoked hopes of greater demand for commodities, lifting copper and oil prices. The AUD rose to a three-week high against the USD and the CAD strengthened as market sentiment is infectiously 'risk-on'.
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