NEWS / Foreign Exchange

USD Plumbs New Depths

11/6/2007 2:50 PM: EUR/$..1.4552 $/JPY..114.56 GBP/$..2.0867 $/CHF..1.1457 AUD/$..0.9269 $/CAD..0.9224

USD Plumbs New Depths

The beleaguered dollar continues to plumb new lows across the board, hitting 2.0904 against the sterling and 1.4570 versus the euro. Sentiment for the greenback remains heavily bearish despite recent US economic not pointing towards the worst-case scenario of an imminent recession.

The latest string of upbeat reports included Q3 GDP, a robust labor market as evident in the October non-farm payrolls and yesterday??™s stronger than expected non-manufacturing ISM ??“ which suggests another 25-basis point Fed rate cut may not be forthcoming. Deterioration in the housing market and credit concerns continue to be the Achilles heel for the US currency as investor nervousness over banks??™ balance sheets remain heightened. Uncertainty about the extent of further write-offs stemming from the subprime debacle will likely plague the greenback over the quarter.

The economic calendar for the Wednesday session will see Q3 productivity, labor costs, September wholesale inventories, and September consumer credit. Consensus estimates for Q3 productivity are calling for an increase to 3.0% versus 2.6% in the previous quarter. Labor costs in Q3 are estimated to slip to 1.0%, down from 1.4% from Q2. Meanwhile, consumer credit is estimated to decline to $8.3 billion in September, down from $12.2 billion a month earlier.
 

Euro Plows Ahead

The euro reached another all-time high against the dollar at 1.4570 and edged closer to the 167-level versus the yen. Data releases from the Eurozone overnight saw October services PMI, which exceeded estimates to 55.8 and September producer prices, which were slightly higher than expected at 2.7% y/y and 0.4% m/m. Retail sales improved in September, albeit short of forecasts, at 0.3% versus 0.1% a month earlier and 1.6% compared with 1.0% in the previous year. However, Germany??™s industrial orders in September tumbled by 2.5%, compared with a 1.2% increase from August.

Aussie Buoyed Ahead of RBA

The Australian dollar trades above the 0.92-level against its American namesake, supported by the prospects of 25-basis point rate hike from the RBA when it announces its decision later this evening. The RBA is largely anticipated to lift its benchmark lending rate by 25-bp to 6.75% given current inflation levels in Australia.