Dollar Declines to Five-Week Low Versus Euro in Forex
Posted by David Clingerman on Thu, Jan 26, 2012 @ 08:21 AM
Here are the current interbank forex rates at this moment on the 26th of January, 2012:
Financial News:
The dollar weakened versus all but one of its 16 major counterparts as the Federal Reserve’s pledge to keep interest rates at a record low for longer than originally forecast spurred investors to seek higher yields.
The U.S. currency fell to a five-week low against the euro after policy makers said yesterday the benchmark interest rate would stay low until at least late 2014 from mid-2013. The Canadian dollar strengthened to parity with the greenback for the first time since November. Brazil’s real was the best performer against the dollar after the unemployment rate fell to a record low.
“The Fed signaling that they will be on hold for longer would push investors further out the risk spectrum,” said Aroop Chatterjee, a currency strategist at Barclays Plc in New York. “This means out of the dollar and into riskier currencies in search of yield. There’s going to be a lot of focus on data the next couple of days as the Fed could be responding some economic weakness that the market has not positioned for.”
The dollar fell 0.4 percent to $1.3159 per euro at 9:02 a.m. in New York after sliding to $1.3177, the weakest level since Dec. 21. The U.S. currency dropped 0.2 percent to 77.60 yen. The euro added 0.2 percent to 102.04 yen, touching the strongest since Dec. 23.
Implied volatility of three-month options of Group of Seven currencies fell to 10.21 percent, from as much as 10.78 percent yesterday, according to the JPMorgan G7 Volatility Index (JPMVXYG7). A decrease makes investments in currencies with higher benchmark lending rates more attractive as the risk in such trades is that market moves will erase profits.
Brazil’s real rose 1.3 percent to 1.7398 per dollar after reaching 1.7320, the strongest in more than two months. The nation, where interest rates are 10.5 percent, saw the unemployment rate fell to a record 4.7 percent in December, beating estimates of a decline to 4.9 percent.
The Dollar Index dropped to the lowest in six weeks amid speculation the central bank will enter another round of asset purchases potentially debasing the currency. The gauge, which IntercontinentalExchange Inc. uses to track the U.S. currency against those of six U.S. trading partners, fell for a second day, losing 0.3 percent to 79.209.
The Fed “recognizes the hardships imposed by high and persistent unemployment in an underperforming economy, and it is prepared to provide further monetary accommodation,” Chairman Ben S. Bernanke said yesterday at a press conference in Washington.
A third, fourth and fifth round of quantitative easing “lie ahead,” said Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co. in Newport Beach, California. The U.S. will suffer “financial repression” as the Fed implements additional easing, he wrote in a Twitter post.
Canada’s currency gained 0.3 percent to C$1.0012 per U.S. dollar after reaching C$0.9993, the strongest since Nov. 1.
Goldman Sachs Group Inc. yesterday recommended its clients buy the Canadian dollar versus the greenback, saying the Fed’s pledge to keep rates low reaffirms a dollar “weakening trend.”
The dollar has dropped 1.3 percent in the past week, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The yen fell 1.9 percent and the euro rose 0.4 percent.
The euro may extend gains until it reaches a key resistance level at $1.3250 before declining, Societe Generale SA said, citing trading patterns.
“The euro found a foothold at $1.2930 yesterday,” and then rose above resistance at $1.3075 and $1.31, Fabien Manac’h, a Paris-based technical strategist, wrote in a research note. “We may see an extension of the recovery started at $1.2620 recently to the $1.3210/50 region before the euro points back” toward $1.2590 or $1.26, he wrote.
The euro weakened earlier today on concern Greece and its private creditors will struggle to agree on a debt swap.
Charles Dallara and Jean Lemierre, negotiating on behalf of private creditors, return to Athens today after European finance ministers insisted bondholders take bigger losses on their Greek debt holdings.
“The markets are on standby waiting for some sort of a resolution,” said Marchel Alexandrovich, an economist at Jefferies International Ltd. in London. “There is a sense that a solution will ultimately emerge, but the whole thing could drag on for quite a while, which will probably keep the euro under pressure.”
The cost to protect against a decline in the euro against the dollar declined. Risk-reversal rates for three-month options on the 17-nation currency were negative 1.6 percent today. The measure reached negative 4.7 percent in November.
