The US dollar edged lower against a basket of currencies as slightly higher European shares bolstered risk demand. Additionally, renewed questions over the dollar's long-term status as the world's reserve currency prompted investors to diversify out of the dollar and into other assets such as gold extending the dollar's weakness. On the data front, the Mortgage Bankers Association said seasonally adjusted mortgage applications which include purchase and refinance loans rose 17.0% last week.
President Obama will address Congress this evening on his vision to overhaul the $2.5 trillion US healthcare system. With many Americans worried that the $1 trillion cost of the overhaul would add to the country's mounting debt, Obama's address to Congress may further add pressure to the weakening dollar.
The euro rallied against the dollar after higher European shares and gold prices holding steady. German inflation came in as expected increasing 0.2% in August.
The British pound strengthened against the dollar, but remains within tight ranges. The pound advanced against a defensive dollar after ratings agency Moody's said Britain's triple-A sovereign debt rating was resilient and affirmed that Britain will retain its AAA status. A survey showed Britain's recovery prospects brightening with consumer morale positive, employers beginning to hire and price pressures absent. Furthermore, official trade data showed exports were up 5% in July, the fastest increase since January 2008, narrowing the trade gap and boosting optimism that global trade was picking up.
The Japanese yen initially weakened against the dollar overnight, but recouped those losses as investors' appetite for riskier assets increased. Bank of Japan board member Miyako Suda signaled she may oppose extending the bank's programs to buy company debt beyond December, citing that leaving them in place could pose problems. With credit markets on the mend, the drawbacks of the BOJ's special measures may outweigh the benefits if kept in place too long.
The Canadian dollar rallied hitting a five-week high against the US dollar. The surge in the loonie is supported by steady gold prices and oil prices.
The Australian and New Zealand dollars touched a one-year high against the slumping US dollar boosted by firm gold and commodity prices. Overnight the Aussie slipped against the greenback after a 1% fall in retail sales in July, but erased those losses as gold and commodity prices rallied.
The Mexican peso firmed vs. the dollar after the Mexican government asked the opposition-dominated Congress to raise taxes and slash spending. Mexican President Felipe Calderon proposed a sales tax and a higher maximum income tax rate. Investors remain optimistic that the main opposition party will back the administration's proposals, thus boosting the peso.
10-Year Treasury Note Yield: 3.512%
Dow Jones Industrial Average: 9,527.19 + 29.63