The U.S. dollar traded in a wide range overnight, but ultimately opened this morning modestly stronger against the majority of its counterparts. Expect the dollar to trade in ranges throughout the rest of the week, but the movements are likely to be choppy as liquidity thins ahead of the Christmas holiday. The U.S. economic docket remains light today with only a report that economists predict will show sales of previously owned homes in the U.S. rose in November. Purchases are expected to increase 2.2%, according to a Bloomberg News survey before data from the National Association of Realtors. Look for the greenback to take its cues from the equity markets, firming up further as Dow Industrial futures fall.
The Euro initially rallied against the U.S. dollar after the European Central Bank’s first traunch of three-year loans to banks exceeded forecasts, fueling bets the facility will spur demand in the region’s bonds. The ECB awarded 489 billion euros to banks, more than the 293 billion euros forecast by economists. However, the Euro pared its advance shortly after the loan figures were published as some investors remained concern that the euro crisis is far from solved. Indeed, European equities turned around and are currently trading about 0.5% lower. The Euro is approximately 2.0% lower versus the greenback this year.
The Japanese yen was little changed against the greenback after the Bank of Japan left its asset-purchase program unchanged while lowering its assessment of the economy, saying a pick-up has paused. The government’s forecasts for real economic growth to register at 2.2% for the fiscal year 2012, the Asahi newspaper reported. The benchmark interest rate was held at a range of zero to 0.1% at the conclusion of the meeting. The Japanese yen is set for a 4.0% gain versus the U.S. dollar in 2011.
The British pound pushed slightly higher against the U.S. dollar and broke fresh 11-month highs against the Euro after the economic docket showed that Britain’s budget deficit narrowed more than economists forecast in November as tax revenue rose and the government’s fiscal squeeze restrained spending. The U.K.’s Office for Budget Responsibility cut its growth forecasts last month, prompting Chancellor of the Exchequer George Osborne to borrow more and extend spending cuts to trim the budget deficit.
