ICM Brokers | Sep 24, 2012 03:43AM ET
The euro fell for the first time in six weeks versus the dollar as reports showed the region’s economy struggling amid the debt crisis. The 17-nation euro declined versus most of its major counterparts before Spain’s government addresses budget issues this week.
Even though the moves by the European Central Bank can take away tail risk, we still have a really dismal economic situation, where at best, its stagnant, and at worst, deepening recession. The euro dropped 1.1 percent to $1.2980 in New York, its largest decline since July 6. The shared currency weakened 1.4 percent to 101.46 yen, its first weekly loss since Aug. 10. The yen strengthened 0.3 percent to 78.17 per dollar.
The pound touched a 13-month high against the greenback on Friday as demand for higher yielding assets was supported by speculation that Spain was moving closer to requesting a full-scale sovereign bailout. In the U.K., official data on Friday showed that the U.K. budget deficit rose to the largest on record for any August last month. The data came after Bank of England minutes on Wednesday showed some policymakers felt the economy may need more stimulus, indicating that the central bank may extend its GBP375 billion asset buying scheme. In the week ahead, investors will continue to eye developments in Spain, while U.S. data on consumer sentiment and spending will be closely watched as investors attempt to gauge the strength of the U.S. economy.
The central bank kept its benchmark interest rate unchanged at 0.1% in a widely anticipated decision. The move came one week after the Federal Reserve announced that it will buy USD40 billion of mortgage-backed securities each month until the labor market improves and pledged to keep interest rates close to record lows until at least the middle of 2015. But the yen firmed up after data from China on Thursday showed that the country’s manufacturing sector remained in contraction territory for the eleventh consecutive month in September.
Canada’s gross domestic product is forecast to grow at 0.1 percent pace in July, down from 0.2 percent in June. Canada’s currency, nicknamed the loonie for the image of the aquatic bird on the CAD 1 coin, fell 0.5 percent this week to 97.64 cents per U.S. dollar in Toronto. The loonie declined with crude-oil futures , which dropped 6 percent to $93.04 per barrel in New York, the biggest slump since the five days ended May 4.Canadian government bonds rose, with the yield on the 10-year benchmark note falling 12 basis points, or 0.12 percentage point, to 1.85 percent.
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