The U.S. Dollar was down on Monday against a basket of currencies, driven by increased demand for higher risk assets.  Today's weakness in the Dollar was triggered by this week-end's statement by the Group of Seven and a better than expected U.S. ISM Services Sector Report this morning.

The Group of Seven, in a prepared statement, chose to leave out comments about the value of the Dollar and instead said it was opposed to excess volatility and disorderly movements in the Forex markets.

Monday morning the U.S. ISM Non-Manufacturing Sector Report was reported better than expected.  The report showed the index rise to 50.9, which was higher than pre-report estimates of 50 and up from an August figure of 48.4.

Because of the friendly nature of each news event, investors felt confident about returning to the long side of higher risk, higher yield currencies.

The EUR USD posted a strong gain on a combination of demand for higher yielding assets and technically oversold conditions.  Despite the strong rally, the Euro remains in a down trend on the daily chart.

Fundamental factors continued to hurt the GBP USD, but appetite for higher yielding currencies helped to curtail losses.  Do not expect a change in trend to the upside, but do watch out for strong short-covering rallies.  The trend is not expected to turn up for the long run until the Bank of England reduces the amount of funding available for its asset buyback program.

The stronger ISM Report helped weaken the USD CAD on the thought that it would help boost the Canadian economy.  Stronger demand for equities and commodities provided additional support.  The strong rise in equities and gold had the largest influence on this currency pair.  The Canadian Dollar probably would have traded much higher had crude oil shown more strength.  Until demand increases and supply falls in crude oil, expect the Canadian Dollar to remain rangebound.

The USD JPY traded mixed throughout the trading session but closed lower by the end of the day.  Comments from the Bank of Japan regarding a possible intervention pressured the Japanese Yen early, but a BoJ official cleared up the matter by restating that the BoJ would only act against the Yen if speculation became excessive and price levels unrealistic.

Firm demand for higher yielding assets helped to drive up the NZD USD and AUD USD.  Traders were also betting heavily that the Reserve Bank of Australia would be the first major central bank to hike its benchmark interest rate.  Investors are speculating that the RBA will raise interest rates by 0.25% at its meeting tomorrow. 

Please do not hesitate to contact us at 1-800-971-2440, with any questions.

DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. The value of currencies may fluctuate and investors may lose all or more than their original investments. Risks also include, but are not limited to, the potential for changing political and/or economic conditions that may substantially affect the price and/or liquidity of a currency. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds and such may work against you as well as for you. In no event should the content of this correspondence be construed as an express or implied promise or guarantee from Brewer FX, LLC and Brewer Investment Group, LLC or its subsidiaries and/or affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Likewise, strategies using combinations of positions such as spread or straddle trades may be just as risky as simple long and short positions. Past results are no indication of future performance. Information contained in this correspondence is intended for informational purposes only and was obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.