Dollar Falls vs Rivals as Stocks Slide, Commodities Surge, and US Debt Set to Increase

Plan to Save Financial Institutions Will Cost $700 Billion

The dollar weakened on Sunday and into Monday as traders and investors digested and weighed the implications to the greenback of the potential $700 billion bailout plan in which the government will buy the bad debt of US financial intuitions for the next two years. The government would also raise the nation's statutory limit on the national debt to $11.3 trillion from $10.6 trillion.

EUR/USD - Dollar Looking Less Attractive With Increased Debt Load

Today's action saw the Euro-Dollar pair climb 300 pips from its open to test the 1.48 level during the NY afternoon session. Foreigners will look at the increased debt load and will be more reluctant to finance it at current prices.

EUR/USD 2 - Euro Continues Rally From 1.39

The Euro, after falling during the latter half of the summer, has again regained its allure as a counterweight to the greenback in terms of being a reserve currency. The Euro- Dollar pair continued its rally since hitting 1.39 on September 11th.

USD/JPY - Wall Street Falls Into Red as Details of Plan Digested, Yen Gains on Dollar

After Friday's the euphoria in global stocks following the first details of the massive bailout plan, today's session stocks up in Asia but down in Europe and the US. The Dollar-Yen, after receding late on Friday from the 108 level, continued falling after Sunday's open. For the session it was down more than 100 pips, testing the 105.60 level. In afternoon trading the Dow Jones index was down more than 200 points while the Nasdaq was off 56 points from its open.

AUD/USD - Investors Flee to Gold, Oil and Commodites as US Dollar Weakens

With the greenback losing its allure, investors put their money into commodities, oil and gold, helping to boost the Australian, New Zealand and Canadian Dollars. In this look at the Aussie-US Dollar pair we see a 200 pip swing from 0.83, which is where the pair was consolidating during Sunday's trading. That puts the Aussie about 700 pip swing since last Wednesday's low at 0.78 to today's high near 0.8450. The Nymex crude oil future soared today, eyeing the $130/bll level, while gold is up more than $40 today to trade around $900/ounce.

UK Rightmove Sees Housing Down 1% in September

Turning to fundamental news now, the UK Rightmove house price index was down 1% for September, the 4th straight month of declines. However, the pace of the decrease was slower than last month. September saw a record low number of properties coming onto the market.

JPN Industial Activity Index Climbs 0.8% in July

In Japan, the all industry activity index rose 0.8% for the month of July, reversing most of June's 0.9% decline. The index was boosted by a reversal in fortunes in the construction sector, which increased 1.3% on the month, compared to the previous 1.1% fall.

CAN Retail Sales Increase 0.1% in July

In Canada, retail sales rose a smaller than expected 0.1%, as car sales fell 0.6% and the food and beverage category declined 0.3%. Excluding autos, sales were up 0.4%. For the most part, Canadian retail sales have been resilient when compared to the struggling economies of the US and the UK.

USD/CAD - Loonie Gains on Rise in Commodity Prices, Brushes Off Sales Data

We already mentioned how commodity currencies performed strongly today and the Loonie was no different despite the lower than expected sales data. After climbing to test 1.05 in the aftermath of the release, the Loonie fell 150 pips to trade below 1.0350 in afternoon trading.

Tonight and Overnight's Releases

Tonight, New Zealand releases a measure of consumer sentiment. Overnight Germany and the Euro-zone release preliminary readings for manufacturing and services PMI. The Euro-zone will also release its industrial new orders. The UK will reveal data on mortgage approvals and manufacturing activity.

Tomorrow's Releases

Tomorrow, Canada will post consumer prices, while the US reveals a government house price index and the Richmond fed index.

Capital Market Services, L.L.C.
www.cmsfx.com

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