The U.S. dollar weakened across the board overnight before paring some its losses in early trading as European equities rose more than 1.0%. Risk appetite accelerated overnight after Greek Prime Minister Lucas Papademos said progress had been made in debt-swap talks with private bondholders. The greenback fell the most versus the higher-yielding currencies. Indeed, the New Zealand dollar advanced 1.0% and the South African rand rallied 0.8% over the U.S. dollar. The Canadian dollar rose to a three month high today even as the country’s economic activity contracted in the fourth quarter of 2011. GDP fell 0.1%, failing to meet expectations of a 0.2% expansion. Later this morning, the S&P home price index is expected to show prices fell at a slower pace in the year to November as the real estate market continues to struggle. Also, the Chicago Purchasing Manager is expected to rise to 63.0 from 62.2 the month prior. Consumer confidence is also expected to rise to 63.0 in January from 62.2 in December.
The Euro advanced versus the dollar as global stocks advanced. The MSCI world index, a free-float weighted equity index measuring developed world markets rose 6% this month, and 0.6% overnight. Yesterday’s much-anticipated EU summit generated mixed results. While the long-term goal of institutionalizing budgetary restraints to prevent reoccurrence is nearly completed, the most pertinent goal of reaching a debt-swap pact with Greek bondholders remained largely unsettled, though PM Lucas Papademos is still reported to be “strongly committed” to reaching a deal. German unemployment rate fell today more than forecasted, from 6.8% to 6.7%. French consumer spending fell in December 0.7%, while entire Euro-Zone unemployment increased as expected to 10.4%, up from 10.3%.
The British pound fell against the euro yesterday as reports came out depicting an optimistic outlook on the settlement of Greek debt. The sterling reached a ten-week high against the dollar as positive euro sentiment dampened demand for the greenback. U.K. mortgage approvals remained unchanged from the previous month, coming in lower than expected 54.0K, at 52.9K. Net consumer credit was worse than the forecasted 0.4B, reported at -.04B.
The Japanese yen remained in familiar ranges near 3-month highs against the U.S. dollar overnight. Japan refrained from selling yen in the foreign-exchange market this month, the Ministry of Finance said today. The nation sold the currency on October 31st when it climbed to a postwar record. Japan’s Finance Minister Jun Azumi maintains that his ministry is prepared to take “decisive” measures to curb the yen’s appreciation. Meanwhile, the economic docket showed that Japan’s industrial production rose more than forecast in December. A separate report showed that Japan’s unemployment rate unexpectedly rose last month as the strengthening currency continues to squeeze manufacturers. The jobless rate was 4.6% in December.
