Daily Currency Report
ICM Brokers | Oct 21, 2011 08:14AM ET
EUR/USD
U.S. stocks and the euro rose,recovering from earlier losses, as European governments discussed deploying $1.3 trillion in funds to tame the sovereign debt crisis and France and Germany asked officials to agree on crisis plans by Oct. 26. Treasuries fell.The Standard & Poor’s 500 Index increased 0.5 percent to 1,215.43 according to preliminary closing figures at 4 p.m. in New York after tumbling as much as 1 percent. The euro gained 0.2 percent to $1.3786, rebounding from a 0.8 percent slide, and 10-year Treasury yields rose two basis points to 2.19 percent after decreasing as much as five basis points. The S&P GSCI Index of commodities lost 0.3 percent, recovering from a 1.9 percent decline.Riskier assets rebounded as two people familiar with the matter said Europe may combine the temporary and permanent rescue funds to unleash as much as 940 billion euros to fight the crisis. German Chancellor Angela Merkel and French President Nicolas Sarkozy said in a joint statement they want euro-region leaders to agree on a “comprehensive and ambitious” plan by Oct. 26 at the latest.“The main thing is -- can we get to the point where we actually have a constructive resolution in Europe?” Brian Barish, Denver-based president of Cambiar Investors LLC, which oversees about $8 billion, said in a telephone interview. “The market is hypersensitive as to whether or not a plan will emerge that will stabilize Europe.”
GBP/USD
U.K. stocks retreated for the third time in four days led by a selloff in banks and mining companies amid concern European leaders are far from agreeing on a solution to containing the region’s debt crisis.Barclays Plc led a gauge of lenders to the biggest decline since Oct. 4. Rio Tinto Group and Anglo American Plc lost more than 3 percent as copper tumbled in London. Debenhams Plc rallied 7.7 percent after reporting increased profit and as data showed an unexpected gain in U.K. retail sales.The FTSE 100 Index lost 65.81, or 1.2 percent, to 5,384.68 at the close in London after climbing 0.7 percent yesterday. The FTSE All-Share Index declined 1.2 percent, while Ireland’s ISEQ Index slipped 0.4 percent. “You’ve got an incredibly uncertain outlook in Europe,”George Godber, a London-based fund manager at Matterley, said in a Bloomberg Television interview. “We are stuck in the risk-on,risk-off roundabout that won’t get resolved until Europe shows some sort of clarity.”The FTSE 100 had advanced for the past three weeks, amid optimism that European policy makers would devise a plan to help solve the debt crisis that has Greece teetering on the edge of a default. Even so, the benchmark gauge has slumped 12 percent from this year’s high on Feb. 8.
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USD/JPY
Japan is preparing to unveil plans to spend an extra 4 trillion yen ($52 billion) to help its exporters cope with a surging yen and spur job creation,according to documents obtained by Bloomberg News.The government will add 2 trillion yen to the 8 trillion yen in foreign-exchange reserves being shifted to the state-run Japan Bank for International Cooperation to aid exporters and spur acquisitions overseas, one document shows. A further 2 trillion yen will be allocated to encourage investment in domestic plants and to hire workers, according to another document obtained from two government officials who declined to be identified because the plan isn’t public.A yen appreciation of almost 6 percent this year has prompted the government to adopt a multi-pronged approach to currency policy. While threatening intervention, Japanese authorities have offered aid to companies hit by the yen’s move and highlighted the lower cost of making overseas acquisitions.Japan imports about 80 percent of its energy needs .“The government realizes the need to alleviate the pain from the continuing strong yen but the damage has already been done,” said Takeshi Minami , chief economist in Tokyo at Norinchukin Research Institute Co. “They should consider ways to stop the strong yen, and that would require more cooperation from the Bank of Japan.”The yen traded at 76.81 against the dollar and 106.27 to the euro at late yesterday in Tokyo. The currency rose to a post-World War II high of 75.95 to the dollar on Aug. 19.
USD/CAD
Canada’s dollar strengthened against its U.S. counterpart on optimism that European leaders will be able to solve the region’s debt crisis next week.German Chancellor Angela Merkel and French President Nicolas Sarkozy agreed to ask euro-region leaders to assess a “comprehensive and ambitious” package of measures to solve the region’s debt crisis at a leaders’ summit on Oct. 23 in order to agree on the measures at a second meeting by Oct. 26 at the latest. Crude oil, the nation’s largest export, pared declines amid improved sentiment for risker assets. “Europe is the big play at the moment and everyone is focusing on that,” said Darcy Browne , managing director of capital markets trading at Canadian Imperial Bank of Commerce in Toronto. “Everything is comment-driven these days. These aren’t fundamental reasons. I don’t think anyone is strapping on any new risk here.” Canada’s currency rose 0.5 percent to C$1.0154 per U.S.dollar by 5 p.m. in Toronto, after falling as much as 0.4 percent. One Canadian dollar buys 98.48 U.S. cents. European governments may earmark as much as 940 billion euros ($1.3 trillion) to fight the debt crisis by combining the temporary and planned permanent rescue funds, two people familiar with the discussions told Bloomberg News today. The loonie, as the currency is nicknamed, declined earlier after Merkel canceled a planned speech to parliament in Berlin tomorrow because of a deadlock about proposals to leverage the European Financial Stability Facility to give it more firepower.
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