NEWS / Foreign Exchange

The U.S. dollar fell across the board overnight

The U.S. dollar fell across the board overnight amid mounting apprehension that the world??™s largest economy??™s growth is slowing more quickly than expected and a rising number of defaults in the US sub prime mortgage lending sector could affect other parts of the housing sector.  However, the greenback managed to pare losses after reports showed growth in US factory output exceeded expectations while docile consumer inflation raised distress about the slowing US economy.  US consumer prices rose 0.4% in February which came in line with expectations and supports the view that the Fed will keep interest rates on hold for now.  

Japanese yen strengthened against the US dollar due to the selling off of the currency overnight.  Asian stocks fell for the third time this week led by the Nikkei 225 Index which dropped 0.69%.  Mitsubishi UFJ, Japan??™s biggest bank, slipped 3.0% and Toyota, the nation??™s leading automaker, fell 0.7% as their exports become less competitive when the yen strengthens.    

The euro strengthened against the US dollar near historically high levels but as central bank diversification is maturing and the US trade deficits have been stabilizing, the long term EUR rally since 2002 seems to be coming to an end.  If risk aversion eases in the near-term, the market could buy still buy more EUR as the ECB maintains rate hikes.

Meanwhile, sterling fell towards this week??™s eight-month low against the euro while it edged up against the dollar.  Look for continual pound weakness aligned with the yen due to the pressure of unwinding carry trades.

The Canadian dollar edged higher versus the greenback as focus lingers on US mortgage sector woes and a tame inflation reading.  Oil prices edged higher and gold prices jumped nearly 1.0% offering more support for the commodity-linked currency.

The Mexican peso strengthened slightly against the US dollar, getting a boost from strong US industrial output data, and Mexican stocks rose 0.21%.  Mexico??™s export sector is closely tied to the US economy.  

Kiwi remained strong as the Australian dollar rose to a three-weak high after comments by a top Australian central banker triggered investors to price in a greater chance of a rise in interest rates later this year. 

Indicative Rates: