Gold stole the show in NY trading and the USD was heavy all session. Chatter overnight around a news story that suggested a secret meeting among some major economies to stop pricing oil in US dollars and instead use a basket of currencies continued to weigh down the greenback. Some of the currencies mentioned for this so-called basket are the Chinese yuan and a composite Arab currency. The former is not fully convertible while the latter does not yet exist so the short-term implications for the USD are negligible in our view.
Equities managed a nice 1.4% rally in broad terms but looked shaky into the closing minutes of trading. The hit piece on the USD elicited a further extension in gold as well. XAU/USD rallied from a NY open near 1027 to sit by the intraday â€ and new all-time â€ highs near 1044. The one caveat is that the bond market did not suggest a massive rally in risk as the 10-year yield only squeaked about 3 basis points higher to 3.25%.
EUR/USD also failed to elicit much fan-fare as the pair rallied to a session high by 1.4760/65 but crumbled back towards the 1.4720 area ahead of the close. We would expect further downside pressure if we break back below 1.4675 here short-term. The commodity currencies were better bid. USD/CAD sank like a stone towards a 1.0550/45 low after opening NY trading around the 1.0615 area. AUD/USD, meanwhile, printed a fresh 2009 high around 0.8920 before backing off a touch and settling around the 0.8900/10 zone.