The U.S. dollar retreated overnight against most of its counterparts, reversing gains from yesterday’s trading session. The U.S. dollar index fell as European stock indexes pared its losses and American stock futures advanced on growing optimism that European finance ministers will agree to a plan to expand the Euro-zone’s bailout fund. The economic docket showed that the number of Americans filing applications for unemployment benefits declined last week to a level that shows little improvement in the labor market. Jobless claims dropped by 6K to 403K in the week ended October 15th, Labor Department figures showed this morning. The print was close to the median forecast of a drop to 400K. Later this morning, Leading indicators are expected to rise 0.2% in September after gaining 0.3% in August. In addition, existing home sales month over month are expected to fall 2.3% in September after rallying 7.7% the month prior.
The Euro pushed higher overnight as Europe’s new bailout fund may be authorized to provide credit lines amounting to as much as 10.0% of a country’s economy, according to a draft document obtained by Bloomberg News. The enhanced fund, called the European Financial Stability Facility (EFSF), may be able to offer loans to countries “before they face difficulties raising funds” in bond markets, according to the draft guidelines. The Euro also found support after European Commission President Jose Barroso said a “positive outcome” was possible at an October 23rd meting of European leaders in Brussels. The policy makers are searching for ways to maximize the firepower of their bailout fund as the crisis threatens to spread to the region’s larger economies. Expect the Euro to trade in volatile ranges over the coming days as traders look for anything to reinforce its hope that we are going to see a comprehensive plan this weekend.
Once again, the Japanese yen held familiar ranges against the U.S. dollar overnight. Meanwhile, worries over the strength of the Japanese currency negatively affecting the export-driven recovery have prompted the Japanese government to seek additional measures to weaken the yen. Japan plans to spend an extra 4 trillion yen ($52 billion) to cope with a surging yen that has dampened the world’s third largest economy. The government will add 2 trillion yen to the 8 trillion yen in foreign-exchange reserves. An additional 2 trillion yen will be allocated to encourage investment in domestic plans and to hire workers.
The British pound fell versus the Euro on optimism progress is being made in a plan to end the European debt crisis. However, the sterling remained largely unchanged against the U.S. dollar. The economic docket showed the retail sales including fuel rose 0.6% from August when they fell a revised 0.4%, the Office for National Statistics said today in London. That’s the biggest gain since April and compares with the median forecast of economists for no change.
