The U.S. dollar tumbled against the majority of its counterparts on widespread risk appetite as traders increased bets that European policymakers may finally provide more concrete details of a plan to cease the European debt crisis. Indeed, European indexes climbed over 1.0% and U.S. equity futures point to a higher open for American shares. The Australian and New Zealand both surged versus the greenback as Asian stocks rebounded. The Aussie also gained after data showed that home-loan approvals rose for a fifth month, adding to signs the domestic economy remains resilient. The Kiwi rose as a gauge of house prices rose to a 22-month high. Meanwhile, the economic docket showed that mortgage applications in the U.S. increased 1.3% last week as borrowing costs close to all-time lows helped boost purchases and refinancing. The greenback will likely remain under pressure this morning as market participants add riskier assets to their portfolio, but expect traders to soon turn their attention to the release of the minutes of the last FOMC meeting today at 2 p.m.
The Euro rose to a three-week high against the U.S. dollar on stronger than expected economic data and ahead of European Commission President Jose Barroso presentation on proposals for recapitalizing banks. Barroso today will unveil proposals on coordinating bank recapitalizations across the EU, on Greece and private-sector participation in its bailout and on the region’s rescue funds. Barroso will announce the plan in a speech to the European Parliament this morning. The euro extended gains after the European Union’s statistics office said industrial production in the euro area advanced 1.2% from July, the biggest increase since November 2010. The print beat forecasts for a drop of 0.8%. The Euro’s advance was tempered as political turmoil in Slovakia delayed its approval of Europe’s enhanced bailout fund. Prime Minister Iveta Radicova wants to start talks today with opposition on a second vote, after the measure was rejected late yesterday. Slovakia is the only euro-area country yet to pass the plan.
The Japanese yen fell modestly versus the U.S. dollar but remains within in 2.0% of its post-war high against the greenback. The economic docket showed that machinery orders for the island nation rebounded in August from the month prior. Bookings rose 11.0% in August from July, the fastest increase in a year, according to the Cabinet office. Nevertheless, the strength of the yen has dampened Japan’s export-driven economy. Nissan Motor Co. chief executive officer Carlos Ghosn said last week that the yen appreciation may cause a “hollowing out” of Japan’s industrial base.
The British pound also rose to a three-week high on optimism European leaders will resolve the region’s sovereign debt crisis. European Commissioner Olli Rehn said there is a fairly good chance that Europe could avert a “calamity.” The pound retraced some of its gains after a report showed U.K. unemployment rose 8.1% from 7.9% in the three months through July. The number of unemployed increased to 2.57 million, the most since 1994 while jobless claims rose for a seventh month in September.
