Friday's Major FX Pairs
ICM Brokers | Dec 28, 2012 04:15AM ET
German power for 2013 dropped to a record after day-ahead prices during the Christmas holidays fell below zero while above-average temperatures pushed down electricity for next-quarter delivery. There is some panic in the market after we saw negative prices of more than minus 200 euros for some hours on Dec. 25, Italy’s government bonds declined, pushing the 10-year yield to the highest level in a week, before the nation sells as much as 3 billion euros ($3.98 billion) of the securities tomorrow, Greece’s four largest banks need to boost their capital by 27.5 billion euros ($36.3 billion) after taking losses from the country’s debt swap earlier this year, the largest sovereign restructuring in history.
GBP/USD
U.K. gilts rose, with 10-year yields falling the most in four weeks, as speculation U.S. lawmakers will fail to agree on a way to avoid the so-called fiscal cliff spurred demand for safer assets. Benchmark yields fell to a two-week low after U.S. Senate Majority Leader Harry Reid said it looks like the nation is headed “over the cliff,” referring to the more than $600 billion in tax increases and spending cuts that will take effect in January unless Congress acts. Gilts also gained on speculation some investors were looking to reduce risk as the year-end approaches. The pound was little changed against the dollar and euro. There is an element of buying related to year-end cash management and that’s happening in a very thin market, The pound weakened 0.1% to $1.6122.
USD/JPY
The yen sank to a 28-month low as data showing a decline in Japanese consumer prices fanned speculation the central bank will heed government calls to step up cash infusions to end deflation. JPMorgan Chase & Co. and Nomura Holdings Inc. cut forecasts for the Japanese currency citing stimulus plans from newly installed Prime Minister Shinzo Abe’s plan. U.S. President Barack Obama plans to meet Democratic and Republican congressional leaders today as a year-end budget deadline approaches. Policy expectations are behind the continuous decline in the yen because the Abe administration gives priority to measures against deflation and a stronger yen, the yen touched 86.64 per dollar, the weakest since Aug. 3, 2010, and traded at 86.44.
USD/CAD
The Canadian dollar fell to its lowest level in almost a month as an impasse on U.S. budget negotiations renewed concern the showdown may push the nation’s biggest trading partner into recession next year. The currency pared losses against its U.S. counterpart after U.S. Speaker John Boehner told fellow Republican lawmakers during a conference call that the U.S. House will convene on Dec. 30. Senate Majority Leader Harry Reid said earlier it looked like the U.S. was headed “over the cliff” and criticized the Republican-led House for not gathering with less than a week left to negotiate a budget deal to avoid $600 billion in automatic spending cuts and tax raises. Prices of natural resources and higher-yielding assets had dropped as investors became more risk adverse. The loonie fell 0.09% to 99.52 cents per U.S. dollar.
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