USD Plunges as Stocks and Commodities Gain

* The dollar plunged in NY trading Tuesday, breaking several important support levels in the dollar index and in the crosses against the euro and Swiss franc. The greenback fell as risk appetite rose and investors financed equity and commodity purchases by low interest dollar loans. The 3-month dollar Libor fell to a record-low 0.30%. Over the weekend, the G-20 finance ministers promised to continue stimulating the global economy. Gold rose above $1,000 an ounce, just marginally below its all-time high in March 2008. The S&P 500 rose 8.99 points to 1,025.39. Concerns over the dollar’s long-term status as the world’s reserve currency also weighted on the greenback after a UN report called for a new world currency. The USD/JPY fell but stayed above the 91-92 support. The GBP/USD rose but failed to break the 1.66 resistance. The USD/CHF plunged and closed well below 1.06 which is the new resistance. The AUD/USD continued its rally, supported by Australia’s improving business confidence. The USD/CAD reversed earlier losses despite surging oil prices.

* The EUR/USD broke resistance and rose to its highest level for the year on rising risk appetite. The dollar index broke important support, indicating further USD drops. Unless the dollar decline is a “head fake” ahead of a traditional September/October stock market correction, the dollar seems to be in trouble. The EUR/USD has resistance in the 1.47 and 1.49 areas and support in the 1.44 area. The pair failed to break support from its uptrend and the dollar index failed to break resistance from its downtrend last week. This indicates that the dollar, having been in a sideways pattern lately, has started on a new down leg. The only thing that can stop the greenback decline seems to be a stock market correction.

www.cmsfx.com

Financial and Economic News and Comments

US & Canada

* US consumer credit dropped by a record $21.6 billion in July, or 10.4% at an annual rate, to $2.472 trillion, after falling a revised $15.5 billion in June, figures from the Federal Reserve showed, marking a sixth monthly drop and the longest stretch of declines since 1991.

* Canada’s building permits unexpectedly fell 11.4% m/m in July to C$4.611 billion ($4.27 billion) after an upwardly revised 1.2% m/m increase in June, according to data from Statistics Canada. Residential permits declined 4.1% m/m in July, and non-residential permits dropped 19.3% m/m.

Europe

* Germany’s seasonally adjusted industrial production unexpectedly declined 0.9% m/m in July after an upwardly revised 0.8% m/m increase in June, according to IP data from the Federal Ministry of Economics and Technology. July IP fell a more-than-expected 17.0% y/y nsa wda, following June’s revised 19.4% y/y drop.

www.cmsfx.com

* Germany’s seasonally adjusted exports rose a more-than-expected 2.3% m/m in July, a third month-on-month rise, after a 6.1% m/m gain in June, data from the Federal Statistical Office showed. Exports fell 18.7% y/y. Seasonally adjusted imports were unchanged m/m in July after a 5.9% m/m increase in June. Imports dropped 22.3% y/y. The trade surplus widened to ?13.9 billion ($19.9 billion) in July from ?12.1 billion in June. The current-account surplus narrowed to ?11.0 billion from June’s ?13.5 billion.

*

* UK industrial production increased a more-than-expected 0.5% m/m in July, including a more-than-anticipated 0.9% m/m gain in manufacturing production, data from the Office for National Statistics showed, adding to UK economic recovery signs.

* According to a forecast from the National Institute of Economic and Social Research, UK GDP increased 0.2% in the three months to the end of August after a 0.3% decline in the three months to the end of July.

* UK retail sales in August declined 0.1% y/y on a like-for-like basis and increased 2.2% y/y on a total basis, generally worse than July figures, the British Retail Consortium reported, adding that “recovery hopes premature.”

* Switzerland replaced the United States as the world’s most-competitive economy, the World Economic Forum said, citing Switzerland’s stability and ability to innovate. The U.S. fell to the second position for the first time since the WEF began its current index in 2004.

* Switzerland’s seasonally adjusted unemployment rate rose to 4.0% in August from 3.9% in July, the State Secretariat for Economic Affairs said.

Asia-Pacific

* Japan’s current-account surplus narrowed more than expected to ¥1.27 trillion ($13.6 billion) in July from a year earlier, after June’s first expansion since February 2008, according to figures released by the Ministry of Finance. Exports dropped 37.6% y/y in July, deepening a 37.0% y/y decrease in June. Imports tumbled 41.2% y/y, easing from June’s 43.8% y/y plunge. On a seasonally adjusted basis, the current-account surplus narrowed to ¥1.159 trillion in July. Exports increased 1.4% m/m in July, the slowest pace since February, and imports rose 9.1% m/m.

* Japan’s merchant confidence declined in August for the first time in eight months, with the Japanese current conditions index unexpectedly falling to 41.7 from July’s 42.4, according to the Cabinet Office’s economy watchers survey. The future conditions index fell to 44.0 in August, the second fall since December, from 44.9 in July.

* Japan’s government, keeping its assessment on the economy unchanged for a second month, said “the economy is showing signs of picking up amid record unemployment and other difficult conditions.” Raising its assessment of the world economy for a third month, the government cited overseas demand as a driver for a Japanese economic recovery and said the global recession is bottoming.

* The NAB Australian sentiment index rose to 18 in August from 10 in July, indicating Australia’s business confidence rose to the highest level since October 2003, National Australia Bank Ltd. reported. The business conditions index increased to 4 in August from 1 in July, indicating conditions on hiring, sales and profits rose to the highest level since May 2008. However, the employment index declined to -11 from July’s -5.

Источник: Hans Nilsson

08.09.2009