The Stronger US Dollar Weighs On Currency Prices

Frankfurt (Nov 12)  The euro gained around 0.3 percent yesterday on the back of weakness in the DX. Further, upbeat market sentiments in later part of the trade supported an upside in the currency. However, sharp upside was restricted due to estimates of decline in region’s GDP data during the week. The euro touched an intra-day high of 1.3416 and closed at 1.3406 on Monday. Italian Industrial Production gained 0.2 percent in September as compared to a decline of 0.2 percent in August. The euro is trading at 1.3394 down by 12 points this morning as the US dollar climbed to trade at 81.27. The US Dollar Index eased around 0.2 percent yesterday on the back of rise in risk appetite in market sentiments which led to decline in demand for low yielding currency. However, uncertainty over the QE tapering by the Federal Reserve cushioned sharp fall in the currency. China’s broadest measure of new credit fell by more than estimated in Oct, suggesting authorities are trying to keep shadow-finance risks in check as leaders map out a blueprint to sustain growth. Aggregate financing was 856.4 bn yuan ($140.6 bn). New local-currency loans of 506.1 bn yuan compared with the 580 bn yuan Bloomberg news. M2, the broadest measure of money supply, rose 14.3% from a year earlier. Eurozone growth data this week may show the region’s nascent recovery slowing to a crawl, supporting Mario Draghi’s case for an interest-rate cut to help the economy get back to its feet. GDP in the region rose just 0.1% in Q3. Last week the ECB surprised markets and reduced its key lending rate by 25bps.

The strength of the US dollar is weighing heavily on the Tasmanian currencies this morning with the Aussie tumbling to trade at 0.9336 down by 24 points while the kiwi fell by 20 points to trade at 0.8234. Data in Australia this morning upset traders after the NAB business confidence release showed a huge drop in overall confidence. The measure of Australian business confidence pulled back from 3-1/2 year high in October as sales and profits stayed subdued, though the survey also hinted at a potential improvement in the sluggish labor market. The report’s main measure of business confidence dropped to 5, from 12 in September which had been its highest since March 2010. The index was still 6 points higher than in October last year and in line with its long run average.