The U.S. dollar rebounded overnight, retracing its steep losses from the day prior. The safe-haven greenback and the Japanese yen found support after a Chinese report showed exports rose the least in seven months and a forecast showed that Germany’s economic growth will under perform previous estimates. The U.S. dollar also rallied versus the commodity-based currencies. Indeed, the South African rand fell from a two-week high and the Canadian loonie slumped as the price of oil retreated nearly 2.0%. Meanwhile, the U.S. economic docket showed that the U.S. trade deficit was little changed at $45.6 billion in August. The shortfall compared with a median projection of $45.8 billion. Also, the number of Americans filing claims for jobless benefits was little changed last week, showing the labor market is making scant progress. Applications for unemployment insurance payments decreased 1K to 404K, according to the Labor Department. Market participants will later shift their focus to a slew of data slated for release tomorrow. In the interim, the U.S. dollar may see continued modest support as U.S. equity futures foreshadow a lower open.
The Euro declined from near a five-week high against the U.S. dollar after German economic institutes cut their projections for the nation’s growth and the European Central Bank said the involvement of private-sector banks in bailouts would risk financial stability. A bi-annual independent report commissioned by the German government forecast the nation’s growth will slow to 0.8% next year from 2.9% in 2011. Earlier this year, the group projected the economy would expand 2.0% in 2012. Also, the ECB said it its monthly bulletin that while private-sector involvement “is certain to place significant stress on the solvency of banks and other private financial institutions in the country concerned, it will also have an impact on the balance sheets of banks in other euro-area countries. The dour projections and the dovish statement from the ECB caused European stocks to fall over 1.0%, weighing on the higher-yielding Euro.
The Japanese yen reversed yesterday’s losses against all of its counterparts as failing global risk appetite boosted demand for the safe-haven. The yen also found support after China’s custom bureau said exports rose a less-than-forecast 17.1% in September from a year earlier. The yen fell yesterday amid speculation that the Bank of Japan would take further steps to weaken the currency from near post-war highs against the U.S. dollar. Japan’s currency tends to appreciate during economic and financial turmoil because the country’s current account surplus makes the nation less reliant on foreign capital.
The British pound fell against the U.S. dollar as market participants raised their bets a weakening economy will bolster the case for further central-bank asset purchases. Last week, the Bank of England announced that it would be expanding its program of bond purchases from 200 billion pounds to 275 billion pounds, the biggest increase since March 2009. Charlie Bean, deputy governor of the U.K. central bank, said the monetary policy committee “could well decide” to expand quantitative easing again, the Guardian reported. Britain’s economic outlook is worsening as the government implements its deepest public-spending cuts since World War II to reduce the nation’s fiscal deficit amid investor concern about the ability of governments around the world to repay debt.
