Dollar At 12-Month High

The dollar may retain initial strength, but it is increasingly difficult to justify current valuations given the underlying US weaknesses.

The Euro tested fresh 12-month lows close to 1.40 in US trading with a further unwinding of high-yield plays continuing to support the US currency. US financial markets remained an important focus after sharp falls on Wall Street during Tuesday. Investment bank Lehman Brothers reported higher than expected losses for the latest quarter and announced an effective break up. The results maintained the underlying lack of confidence and put carry trades on the defensive which helped underpin the dollar, especially with commodity prices generally lower.

The latest jobless claims data will be watched closely on Thursday as data over the past few weeks has continued to suggest an underlying deterioration in the labour market.

The European Commission cut its 2008 GDP growth forecasts for the Euro-zone and suggested that the 2009 forecasts would be lowered. There were also reports that the IMF had warned over German recession risks. The latest French industrial production data was stronger than expected which provided some relief, but the Euro was unsettled by comments from EuroGroup head Juncker that the Euro was still overvalued and it fell again late in US trading, with a dip to below 1.39 in Europe on Thursday

Investica
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