The U.S. dollar traded in a relatively flat range overnight even as global risk sentiment subsided somewhat. The greenback did rise to a one-week high against the Japanese yen after government data showed Japan carried out so-called stealth intervention to weaken the currency in November. The greenback slipped against the Australian dollar after the Reserve Bank of Australia unexpectedly kept interest rates unchanged. Indeed, the central bank held the benchmark interest rate at 4.25%, while all but three of the 27 economists surveyed by Bloomberg predicted a cut to 4.0%. The Swiss franc fell against the U.S. dollar and the Euro as Swiss central bank interim Chairman Thomas Jordan said the currency remains “very strong” and policy makers can’t allow it to appreciate further. “We remain firmly committed to defending the minimum exchange rate of 1.20 francs per Euro.” He continued, “We will not tolerate any trading below the minimum rate.” The franc’s weakening against the common currency has allowed the greenback to also push higher against the franc. With no major economic data set to be released in the U.S. this morning, expect risk sentiment to seesaw with speculation over a Greek restructuring deal this week.
The Euro remained relatively flat overnight, as market sensitivity is numbing down to continuous Greek debt ‘will they’ or ‘won’t they’ talk. Greece once again failed to come to terms on a debt writeoff with private creditors, causing German PM Angela Merkel to report, “time is running out”. The next Greek payment isn’t due until March, so it is likely this saga will persist until actual costs are incurred. In Germany, December industrial production lagged behind the previous month and below forecasts, coming in at –2.9%, and 0.9% on the year. The ECB rate decision is Thursday, and is widely expected to remain steady at 1.0%.
The Japanese yen fell against nearly all of its counterparts as data showed Japan engaged in a “stealth” intervention in November. Japan’s Ministry of Finance said the nation sold 1.02 trillion yen against the dollar on the first four days in November in addition to 8.07 trillion yen on October 31st. Finance Minister Jun Azumi said he won’t rule out any options to curb the yen’s appreciation and that he will take action whenever necessary. Stealth intervention is carried out without any official announcement from the finance ministry.
The U.K. 10-year gilts advanced again yesterday as the nation aggressive austerity measures continue to impede the economic growth. The Bank of England is reportedly considering taking additional quantitative easing measures on Thursday when they release their rate decision, expected to remain unchanged at 0.50%. The BOE asset purchase target is currently at 275B pounds, and could increase between 50-75B pounds. The U.K. will also see industrial and manufacturing production numbers on Thursday, expected to improve on the month prior.
