The dollar rose against the yen in year-end positioning but traded little changed against the euro on Monday in holiday-thinned trade as investors had mixed opinion on the prospects of further gains after recent rally. The greenback also gained on speculation that U.S. consumer confidence, due out on Tuesday, will show improvement in December, encouraging the Federal Reserve to end emergency stimulus measures in 2010. The dollar index, a measure of performance against six other major currencies, was steady at 77.61, off a 3-1/2-month high of 78.45 set last week.
Despite euro's initial weakness to 1.4350 in Asian opening, dragged down by decline in the pound, price rebounded from there after meeting renewed buying. The single currency later hit an intra-day high of 1.4414 in European morning before retreating in NY session.
The British pound went through a choppy Asian session, partly attributed to holidays in New Zealand, Australia and the U.K. Cable fell to 1.5932 in Asian morning and later rebounded to 1.6018 in NY afternoon before stabilizing.
European stock markets marked fresh 14-month highs Monday. In Paris, the CAC-40 rose 0.9% to 3,947.15, above its previous 14-month closing high of 3,912.73 set Dec. 24. The German DAX index climbed 0.8%, breaking through the 6,000 barrier for the first time since September 2008. The strength in European and Asian stocks markets supported risk appetite and the greenback benefited. Despite initial choppy move in Asian morning (price briefly rebounded to 91.42 before retreating back to 91.45), the pair traded narrowly in European and NY sessions.
Gold recovered after finding support at $1,101 an ounce, reaching as high as 1113.80. Crude oil soared and hit $ 79.12 a barrel, the highest price in a month. The commodity currencies (Australian Dollars, New Zealand Dollars and Canadian Dollars) benefited from the strength of these raw materials and all three of them rose against the greenback. The three currencies hit their intra-day highs of 0.8892, 0.795 and 1.0419 against the dollar respectively in NY session.
Data to release on Tuesday include Japan manufacturing PMI, Germany CPI prelim and U.S. Consumer confidence.