Wednesday, November 14, 2007

Market Wrap - 14 November 2007

USD: The dollar fell against most major currencies on Tuesday, resuming a long-term decline after a respite from previous sessions. On Wednesday, the U.S. government will release its October retail sales report which will be scrutinized for any signs weakness in the housing sector has hurt consumer spending.

EUR: The Euro dollar traded higher towards 1.4650 despite Germany’s ZEW survey disappointing. The survey of economic sentiment worsened from -19 in October to -30.0 in November, well below the expected -20. Data releases out of the Eurozone were on the whole disappointing on Tuesday. French CPI edged up more than expected while Eurozone industrial production fell 0.7% m/m in September, worse than the expected 0.2% decline.

JPY: The dollar was higher against the Yen; however, as the Japanese currency fell from an 18-month high against the dollar after comments from Japan's prime minister abruptly ended the unwinding of carry trades that had pushed the unit higher in recent days. Japanese Prime Minister Yasuo Fukuda told the Financial Times that the yen was appreciating "too fast" and speculators needed to be careful to avoid the possibility of intervention. Dealers had previously been rapidly unwinding risky trades, increasing volatility in the currency and equity markets. The low-yielding yen had surged in recent days as renewed fears that credit-related problems could spread to the wider U.S. economy sapped risk appetite among investors, prompting them to buy back yen they had sold to fund purchases of higher-return currencies in carry trades.

AUD: The Australian dollar advanced past 90 U.S. cents on Wednesday as firmer regional stock markets encouraged investors to return to riskier positions in high-yielding currencies. Asian stocks tracked big gains on Wall Street, where the market benefited from favorable comments by Goldman Sachs on asset write downs and from a surprisingly strong retail sales report from Wal-Mart Stores Inc.

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