Currency Markets – European Trading & Into New York

The U.S. dollar was slightly lower against the Japanese yen on Wednesday but held its ground against other major currencies, as investors eyed a softer tone in equity markets. The dollar and yen have both remained sensitive to moves in equity markets, rallying on safe-haven flows when demand for shares and other assets was perceived to be more risky. Conversely, the currencies have tended to lose ground when investors have shown an increased appetite for risk. The euro traded lower to 1.4120, down from USD1.4197 late Tuesday, and the British pound traded at 1.6437, little changed from earlier. The euro had little reaction to the fundamental news in Europe this morning which showed industrial new orders across the euro zone falling by an unexpected 0.2% in May. Economists had forecast a 2% monthly rise, so the green shoots will have to wait!

The British pound trimmed losses after minutes of the Bank of England’s July 8-9 Monetary Policy Committee meeting showed members voted 9-0 to leave the bank’s asset purchase program unchanged at 125 billion pounds (USD205 billion). The Canadian dollar has one less roadblock in the way of further appreciation, after the Bank of Canada lowered the intensity of its jawboning against undue currency strength in Tuesday’s policy statement. Heading into Tuesday’s central bank policy announcement – which produced the expected reiteration of a conditional commitment to hold the key policy rate at 0.2% well into 2010 along with rosier economic projections – there had been concerns that the Bank might again speak out forcefully against rapid Canadian dollar appreciation.

Currency Market Outlook

For the euro vs dollar we are getting reports that offers are now seen placed between /30 from Far East account(s).Traders suggest that interest could be option related noting the large expiry for the NY cut. Early trading in New York has seen demand for the euro crosses, in particular the euro yen which is now trading at 133.11.

The dollar vs yen continue to drift lower in early trading as the markets continue to absorb Ben Bernanke’s comments, with many of the major currencies simply trading sideways but with added volatility minute by minute. Very difficult trading conditions at the moment and not for the feint hearted or novice.

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