Saturday, February 12, 2011

Dollar Rampant ahead of Weekend on Egyptian Fears

Dealing with the unexpected has sent the dollar surging overnight in
response to President Mubarak's unpredicted choice to extend his stay
in office until September. Making matters of poorer quality is news
that the nation's armed forces back his plot and will aid the
transition over time. The importance is a buildup in the roar from the
thronging masses descending on Cairo's Tahrir Square. Heading into the
weekend during which whatever thing could happen and, very likely
will, the only opportunity traders are keen to take is that the
dollar's safe haven reputation will send it higher on a day when a
further sign of domestic strength might reveal a rise in consumer
confidence to its highest in seven months.

*U.S. Dollar* - The dollar index jumped after Mubarak addressed his
people and said he'd not take note to the voice of an increasingly
hostile further than world. The dollar rose by 0.4% to 78.58 against a
basket of currencies as investors ran for cover seeking its safety
ahead of the weekend. Later on Friday morning the University of
Michigan will release its January consumer confidence reading, which
is predicted to show a further improvement as households improve. If
the index matches the expected reading of 75.0 it will be the best
performance since June. Investors keep changing their take on the
dollar between its use as a funding vehicle as the global economy
recovers and as an outright bullish play. A recent slide in bond
prices has changed investors' perceptions over the dollar's role as a
involve trade victim. The spike in bond yields has burned many
investors as borrowing costs rise and with the tailwind of widening
yield spreads further boosting the dollar's appeal.

*Japanese yen* - Testimony to the dollar's changing role in the
involve trade arena is today's ascent for the greenback to its highest
against the yen since January 7. The dollar bought ¥83.68 making for
a weekly rise from last Friday's close at ¥82.37. The dollar was
bought against most Asian currencies at the end of the week after the
People's Bank of Plates set its daily reference rate for the yuan at
its strongest in several weeks and the Bank of Korea unexpectedly left
monetary policy unchanged.

*Aussie dollar -* Governor Stevens appeared in front of a
parliamentary committee on Friday to discuss the economy and monetary
policy. He came across as content with current policy and described
monetary conditions as being "on the firm side" adding that
policymakers had deemed it "sensible of late" to leave interest rates
unchanged. Expectations of any further rise in interest rates promptly
diminished and added to the risk-off nature of trading in light of
events in Egypt, the Aussie dollar slumped right through par with the
dollar for the first time since January 31 and sad down at 99.60 U.S.

*Euro -* The euro is losing out to the dollar and is also hampered by
growing concerns that the sovereign debt crisis is on the verge of
reemerging. The euro reached a session low at $1.3508 matching
Monday's low. German consumer prices for January dipped once again
between months but the annual pace nudged higher to a 2% pace.

*British pound -* Former Bank of England outsider Kate Barker turned
conventional wisdom on its head, making traders reckon about the
plausibility of sterling-supportive increases in interest rates. She
noted that the Bank is likely to be highly wary of fuelling the pound
though a rise in interest rates in a go calculated to control
inflation but that would undermine growth. Recognizing that the
integrity of the Bank is challenged at a time when inflation is nearly
twice its target and growth has had "the wind taken out of its sails"
Ms. Barker rephrased the burning issue of credibility facing the Bank.
If the MPC voted to now tighten monetary policy to address inflation
and caused a crush to growth at a time when the economy is already
hamstrung a whole new consensus over its credibility would emerge with
people likely to question, "Do we really want these people running our
economy?" Ms. Barker noted that exporters who have benefitted from a
decline in the level of the pound since 2007 could easily afford to
see sterling weaken from its current levels in a go that would benefit
the broader economy. The pound slid on Friday to $1.5963 before
rebounding to above $1.6000.

*Canadian dollar -* The Canadian unit aced a nice combination on
Friday, not only lynching on to the coat tails of a firmer greenback,
but also uplifted by rising crude oil prices s perceived tensions in
the Middle East flared. The loonie shrugged off an earlier decline to
the greenback to $1.0014 U.S. cents before edging back to an unchanged
$1.0044 cents.

Source: ActionForex.Com

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