The U.S. dollar fell across the board overnight as stocks rallied around the world on optimism European leaders are nearing an agreement to contain the debt crisis, dampening demand for a refuge. Indeed, European and Asian stocks climbed 3.0% and 4%, respectively. In addition, Dow Industrial futures foreshadow American stocks will add to their 2.5% gain from yesterday’s session. The South African rand and the New Zealand dollars were amongst the best performers against the greenback as the price of commodities steeply rose. Oil is up 3.0% from yesterday’s close and the price of gold has rallied over $70 and ounce. Meanwhile, later this morning the economic docket is expected to show the Conference Board’s U.S. consumer confidence index rose to 46 this month, according to economists surveyed by Bloomberg. The reading in August was 44.5, the weakest since April 2009.
The Euro rose for the third day against the U.S. dollar on widespread global risk assumption and as Italy and Spain held successful debt auctions today. The European Central Bank is likely to debate next week restarting covered-bond purchases and may discuss interest-rate cuts, a euro-region central bank official who declined to be named said yesterday. In addition, traders became more optimistic about the Greek debt crisis after U.S. Treasury Secretary Timothy F. Geithner predicted European governments will use more force to resolve the crisis after they heard the concerns of global finance officials. European officials “heard from everybody around the world” in Washington last week, Geithner said. “Europe’s crisis is starting to hurt growth everywhere, in countries as far away as China, Brazil, India and Korea. And they heard the same message from us they heard from everybody else, which is it’s time to move.” Greek Prime Minister George Papandreou is meeting with German Chancellor Angela Merkel in Berlin today as credit default swaps show a more than a 90% chance the Mediterranean nation will default on its debt. The talks come two days before German lawmakers are set to vote on enhanced powers for the euro-region’s 440 billion-euro rescue fund.
The Japanese yen came under pressure versus all of its counterparts on global risk aversion, but remained in a tight range versus the U.S. dollar. However, the Japanese yen has strengthened against all its 16 major counterparts this month, prompting concern Japan will intervene in the market to halt its advance. Japan is ready to take bold action on the currency if needed, Finance Minister Jun Azumi said today.
The British pound rose for a third day against the U.S. dollar and Japanese yen as stock gains pushed up higher-yielding currencies. The pound also found support after a measure of U.K. shop sales declined this month to the lowest level since May 2010. The Confederation of British Industry said its retail sales index slid to minus 15 in September from minus 14 in August. Stores expect sales to fall at a “broadly similar pace” in October, CBI said.
