Forex summary

Daniel J. Meckstroth, chief economist at the Manufacturers Alliance/MAPI

Dow Jones - "While strong exports and easing import competition will cushion the blow to the durable goods industries, domestic demand for capital equipment is declining. New orders for non-defense capital goods excluding aircraft in the first ten months of this year are down 1.7% from the same period one year ago. The low investment activity indicates businesses remain cautious regarding the outlook for next year."

read more : Daniel J. Meckstroth, chief economist at the Manufacturers Alliance/MAPI

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FOREX-Dollar hits 1-week highs, firmer tone seen fleeting

(Changes byline, updates prices, quotes)

By Meg Clothier

LONDON, Nov 28 (Reuters) - The dollar rose to one-week highs versus the euro, the yen and the Swiss franc on Wednesday, as investors took profits on the U.S. currency's recent slump to multi-year lows and thin volumes accentuated market moves. The more positive tone on the dollar was kick-started on Tuesday after news that Abu Dhabi Investment Authority was buying an equity stake in Citigroup Inc (C.N: Quote, Profile, Research), giving confidence to investors rattled by fears of more credit market troubles as the year-end approaches.

Consequent gains in U.S. stock markets overnight [.N] attracted investors into dollar-denominated assets.

However, analysts said dollar strength was likely to be short-lived given the weak tone in U.S. economic data, prospects for further Federal Reserve interest rate cuts and the trickle of bad news from financial companies hit by the credit crunch.

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Blame for strong euro vs yuan lies with U.S.-China

BEIJING, Nov 28 (Reuters) - The euro's rise against the yuan is largely a reflection of a sharp drop in the dollar, and the European Union should look to Washington to resolve the problem, Chinese Premier Wen Jiabao said on Wednesday.

He told a news conference after a China-EU summit that Beijing would continue to reform its currency regime along market lines with the aim of eventually making the yuan convertible for purely financial transactions.

Read more:Blame for strong euro vs yuan lies with U.S.-China

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Dollar: 1.50 in the Crosshairs?

There is no doubt that the EUR/USD pair wants to target 1.5000 again and may actually reach that level this week, but it will have to do so with more substantial reasons than mere stop running. Trading in coming days could be well be driven by the housing data upon which the whole dollar arguments rests at the moment. If housing continues to plummet to subterranean depths, putting relentless pressure on the Fed to cut in December, currency traders may well feel emboldened to run the 1.500 barrier once again . However, if housing shows some signs of stabilization, the rest of the economic docket looks relatively dollar friendly.

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Yen Gained On Risk Aversion

The dollar fell below 109 against the yen for the first time since June 2005. The sterling dipped to as low as 222.48 from 227.50 versus the yen, while the euro fell to 160.10 against the yen.


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The dollar is testing support

Surprisely, housing starts increased 3% to an annualize rate of 1.229 million units (1.17 million expected) in October. It has been the first increase of the past four months and was equally distributed among all the U.S. regions with the Midwest showing a move of 21.1%. Multiple houses lead the way by moving up more than 40%, while single homes declined 7.3%. It is difficult to see a bottom, as permits declined 6.6% month over month (down 24.5% year over year) and inventories stays very high.

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Fed to Hold Rates?

In a recent speech, a prominent Federal Reserve Board governor strongly hinted that the Fed would maintain US interest rates at current levels at the Fed's next meeting. The Fed is caught in the delicate position of trying to balance economic growth with the specter of inflation. While technically the Fed is always trying to meditate between these two outcomes, its current position is especially tenuous since the US economy is trending downward while inflation trends upward. Despite the emphatic claims to the contrary, futures markets are still pricing in a rate cut, setting the stage for a showdown with the Fed. As usual, the Dollar's fate hangs in the balance. The Financial Times reports....

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Can China Dump the Dollar?

I recently read an interview in the Washington Post with Brad W. Setser, the Council on Foreign Relation’s currency expert. One of answers he gave was pretty revealing in terms of what China can and cannot do. First, here is a little background he gives on why China and other export-driven emerging economies do not want currency appreciation against the dollar....

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Sterling touched a 4-1/2 year low against the euro

Sterling touched a 4-1/2 year low against the euro and fell versus the dollar on Friday as fears of slowing economic growth and expectations of interest rate cuts continued to weigh on sentiment.

The pound has been under pressure versus the euro since the Bank of England last week signalled that interest rates are set to fall, hitting sterling's yield appeal.

Weaker than expected GDP data for the third quarter [ID:nONS003203] gave another reason for investors to sell the pound.

"GDP data was weaker than expected and investors are more worried about the outlook for the UK economy increasing expectations that the Bank of England may cut rates as soon as next month," said Johan Javeus, FX strategist at SEB Merchant Banking in Stockholm.

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The dollar teetered close to its all-time lows against the euro on Thursday

LONDON (Reuters) - The dollar teetered close to its all-time lows against the euro on Thursday as the market waited to see whether the European Central Bank would voice concern about the sharp rally in the single currency.

The ECB is widely expected to announce no change in its 4.0 percent interest rate later on Thursday, so all eyes will be on what President Jean-Claude Trichet says about the conflicting challenges of euro strength and a jump in inflation.

"Although we remain euro/dollar bullish longer term, the risk is a pull-back today as the ECB suggests the exchange rate is back on the policy radar," RBC Capital Markets said in a client note.

Meanwhile investors remained perturbed by expectations that the Federal Reserve could cut rates again next month, further reducing the dollar's yield appeal, with stock futures already pointing to a weak start on Wall Street.

"Euro/dollar is not being driven by more fundamental factors, but by worries about whatever negative news emanates from the U.S., whether it's about industrials or the banking sector," said Michael Hart, currency strategist at Citigroup.

read more Dollar hovers above lows