Risk Appetite Pressures Dollar
The US dollar fell to a 14 month low against a basket of major currencies on Thursday. (Oct. 8, 2009) as rising stocks prompted an increase in risk appetite. The Aussie dollar rose due to strong employment data and the euro rose to a two week high of $1.48. Soft demand for 30 year treasuries put more downward pressure on the greenback. Investors have watched US debt auctions closely this year and many are concerned with massive US deficits.
Stocks Up
US stocks rose as Alcoa Inc posted unexpected profits and retailers reported positive monthly sales and US unemployment claims hit a nine month low last week adding to recovery hopes. Fabian Eliasson of Mizuho Corporate Bank stated, “It’s just a continuous recovery play, We’re seeing good numbers all over the place.” The ICE Futures U.S. dollar index which measures the US dollar against six major currencies fell to 75.767, the lowest since August 2008. The DXY was last down 0.9% at 75.775 .DXY.
Aussie Dollar Wins Again
The dollar vs. yen was down 0.2% at 88.41 yen. Currency analysts said that some Asian central banks including those from emerging economies were buying dollars in an attempt to slow the dollar’s slide. The Aussie dollar rose 1.8% on better than expected Australian jobs data and the Aussie dollar rose to a 14 month high.
Trichet’s Statement Helps Euro
The euro was up 0.6% after European Central Bank president Jean-Claude Trichet said that US support for a strong dollar policy was very important. Matthew Strauss of RBC Capital Markets said, “It was actually what he didn’t say that caused the market to buy the euro. Before Trichet’s briefing, there was chatter in the market that he may give more forceful comments on having a ’strong’ dollar. But Trichet just gave the standard language so we saw some relief rally for the euro.” Trichet also said that the Euro Zone economy is stabilizing and will recover gradually. He also warned that a recovery will not be fast and said that interest rates are appropriate for the current economic climate.
Thursday was the first anniversary of the central banks coordinated effort to cut rates to bolster confidence after the collapse of Lehman Brothers.
