GO Markets - FX Market Commentary

By IBTimes Staff Reporter | December 21 2009 6:02 PM

The US Dollar's tumultuous investor relationship appears to be turning the corner as the currency continued to maintain ground against major counterparts in overnight trade. The common theme throughout the global financial crises saw the greenback benefit in times of adversity, as trader flock to the relative safety of the low yielding heavy weight. The same market sentiment saw the greenback become the veritable whipping-boy when the sun began to shine. The critical juncture in sentiment came about in the recent employment data which saw US Nonfarm payrolls which fell by 11,000 in the month of November, outstripping the 125,000 job cuts predicted. The dire unemployment situation is considered the missing link on a sustained recovery in the US; the outperforming US Non-farm Payrolls now has economists projecting the scales to turn to positive job creation in early 2010.

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A rarity in recent times, overnight movements on the greenback tracked outperforming equity markets, with the US dollar index which measures the value relative to six major foreign currencies rising to highs of 78.14 up 37 pts on the day.

A continuance of this dollar-positive shift in sentiment certainly narrows the window of opportunity for the strength of the local unit, as traders bet on a winding back of economic stimulus in the US, in-turn sooner than expected interest rate hikes. The Aussie dollar parity party's planed by many currency strategists have been taken of the table in the near-term, especially taking into consideration the recent feedback from the Reserve Bank in relation to near term interest rate movements. RBA Deputy Governor Ric Battellino recently stated interest rate levels are now back in the normal range, which of course paints a clear picture on interest rate movements in early 2010.

Overnight, Aussie dollar movements were governed by the broad based US Dollar strength falling to fresh 11 week lows in recent minutes. At the time of writing the Aussie is buying 88 US Cents and remains under pressure ahead of a solid week of economic data in the states.