|
(CEP News) - The euro fell by more than four cents against the U.S. dollar at one point on Tuesday, in the biggest single-day drop in the currency since its 1999 inception.
The euro has since shaved those losses but is down 0.0361 to 1.4076 in a broad-based U.S. dollar rally. The reasons for the U.S. dollar rally are unclear. The greenback found a bid in the overnight session on speculation that U.S. lawmakers will get back to the negotiating table and work out a deal to shore up the financial system. But the U.S. dollar got a renewed bid early in the North American session. Most currency strategists point to a combination of low liquidity and extraordinary demand for quarter-end funding. "The credit markets really are in quite dire straits and the demand for dollars might well be reflected in fx. There could be redemption issues for hedge funds as well and very thin liquidity overall," said Shaun Osborne, chief currency strategist at TD Securities. Also helping was a pair of economic data releases that showed higher-than-expected consumer confidence and manufacturing in the Chicago area. But others are pointing to other factors in the historic U.S. dollar jump. A few rumours are running through markets. The first is that French President Nicolas Sarkozy will guarantee French bank debt in a move similar to what Ireland did earlier today. Sarkozy is meeting with banking officials today. The second is that the Fed, ECB, BOC and SNB are planning a co-ordinated rate cut in the next day. "Co-ordinating rate cuts would probably not be the worst thing at this point," Osborne said. The Canadian dollar is down 0.0140 to 0.9433 against the U.S. dollar (1.0597 USD/CAD) and up 0.26 to 99.90 against the yen. The U.S. dollar is up 1.69 to 105.87 against the yen and the Dollar Index is up 1.891 to 79.362. The euro is down 0.0355 to 1.4082 against the U.S. dollar, down 0.0176 to 1.4920 against the Canadian dollar, down 0.0068 to 0.7915 against the pound sterling and is lower by 1.30 to 149.08 against the yen. The pound sterling is down 0.0292 to 1.7795 against the U.S. dollar and down 0.0054 to 1.8860 against the Canadian dollar. WTI crude oil is up $1.83 to $98.20. The front month gold contract at the Chicago Board of Trade is down $13.40 to $881.00 per ounce. Other markets are reversing some of the knee-jerk reaction to the failure of U.S. legislators to pass the $700 billion financial stabilization package. North American equity markets halved yesterday's drop and yields are climbing. Further helping the situation in Canada was a surprisingly strong report on July gross domestic product. Real GDP shot up 0.7% in the month, well ahead of the consensus estimate of analysts. Economists had been expecting a month-over-month real GDP gain of 0.2% following June's reading of +0.1%. Toronto's S&P/TSX composite index is up 488 points to 11773, the Dow Jones industrial average is up 290 points to 10656, the S&P 500 is up 40 points to 1146 and the Nasdaq is up 68 points to 2052. European stock markets closed with the Eurostoxx up 46 points to 2634, the UK FTSE 100 up 84 points to 4902 and the German DAX up 24 points to 5831. U.S. two-year yields are up 27.9 bps to 1.94%, with five-year yields up 23.0 bps to 2.91%, 10-year yields up 17.0 bps to 3.75% and 30-year yields up 12.8 bps to 4.24%. The Eurodollar March 09 contract is down 34.5 ticks to 97.03. The yield curve is flatter, with the 10/2-year spread down 10.1 bps to 181.22 bps. Yields on two-year Canadian government bonds are up 17.6 bps to 2.74%, with five-year yields up 19.7 bps to 3.11%, 10-year yields up 18.0 bps to 3.69% and 30-year yields up 10.4 bps to 4.13%. The December 08 BAX contract is down 21.5 ticks to 96.96. In Germany, returns on two-year German bonds are up 4.1 bps to 3.48%, with five-year yields up 8.1 bps to 3.77%, 10-year yields up 4.5 bps to 4.02% and 30-year yields up 1.8 bps to 4.60%. Yields on UK two-year bonds are up 1.5 bps to 4.02%, with five-year yields up 3.3 bps to 4.20%, 10-year yields up 6.8 bps to 4.45% and 30-year yields up 4.1 bps to 4.50%. All data taken at 11:50 a.m. EDT. By Adam Button,
This email address is being protected from spam bots, you need Javascript enabled to view it
, edited by Nancy Girgis,
This email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News. A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer. |
