The Dollar is holding mostly steady early on Monday after a weekend meeting of industrialized nations passed with little comment on currencies, though the Euro found some support as the ECB challenged talk of early rate cuts. The Group of Seven (G7) finance ministers cautioned that the global credit crunch would drag on the world economy but left it to individual countries to take their own remedial action.
The single currency was aided by European Central Bank President Jean-Claude Trichet who warned the market not to bet on a cut in interest rates because of persistent inflation pressures in the euro zone. Euro zone finance ministers also sounded relatively relaxed about the Euro's strength against the US Dollar. However, Investors still seem to be betting that Europe has not de-coupled completely from the United States and will be impacted badly enough to force a policy easing in coming months. Such speculation dragged the EurUsd down 3cts or 2.01% last week, taking it as low as 1.4440 at one point.
On Friday, EurUsd edged up 0.26% to 1.4564. Ahead of Monday expected thin market as Tokyo is close while China is still celebrating Lunar New Year. UsdJpy was sitting at 107.31, unchanged, as risk aversion kept the Japanese currency underpinned. The biggest mover on Friday had been the Canadian dollar, which jumped after strong domestic employment data seemed to argue against aggressive rate cuts there. However, Bank of Canada Governor Mark Carney on the weekend said further rate cuts would likely be needed even though the economy had proved resilient so far. UsdCad was down 1.04% to 0.9989 at Friday close. AudUsd was holding firm at 0.8956, benefiting from speculation the Reserve Bank of Australia could raise rates again, having lifted them to an 11-year peak of 7% last week. The central bank issues its quarterly statement on monetary policy later on Monday and is expected to talk tough on inflation, leaving the door open for more tightening if the red-hot economy did not cool soon.