Osama bin Laden burial at sea boosts dollar

British pound – Britain remains closed for a holiday, while forex dealers took the argument over a stronger dollar to cheapen the pound, which slipped to $1.6650 at one point overnight. A Hometrack housing survey showed that home values were unchanged in April as 22% more would-be buyers registered with realtors in what some claim is a sign that the market has cheapened enough. Fewer Britons predict that home prices will be lower in one year’s time than at the start of the year.

Japanese yen –Over the weekend Bank of Japan’s Shirakawa called the outlook for Japan’s economy “severe” in light of the earthquake and its trail of destruction. The government today approved a ¥4 trillion ($49 billion) recovery package to help the nation rebuild from the wreckage. The yen initially rose to ¥81.00 against the dollar as negative thoughts surrounding the nation manifested in rising risk aversion, but the bin Laden news changed the landscape helping the dollar recover to ¥81.45. Further negative domestic news saw March wages decline 0.4% for the first such drop in 13 months, while vehicle sales slumped by 51% on a yearly basis in the aftermath of the spate of natural and manmade disasters.

Canadian dollar – One might expect that the commodity dollars would be flying in light of a buoyant pre-market session for U.S. index futures. Yet neither the Aussie nor Canadian is feeling the benefit. Canada today faces elections, which partially accounts for why the unit is struggling. However, the widening yield theory that often supports the loonie took a couple of dents last week in the form of a report showing weaker-than-forecast U.S. growth while the Canadian economy unexpectedly shrank in February. The Canadian dollar is a little softer on Monday buying $1.0502 U.S. cents.

Aussie dollar – The Aussie rose to $1.1011 in early Asian trading before the announced death of bin Laden only to lose almost a cent as his body was speedily buried at sea by U.S. forces. The Reserve bank meets Tuesday to discuss monetary policy with a chorus of unchanged views keeping the Aussie in check for now. Dealers still believe that it’s more likely that the domestic central bank will lift rates again before year-end than the Federal Reserve will do the same in the U.S. That view tends to keep the Aussie uplifted especially when strong economic winds fill its sails.

Andrew Wilkinson is a Senior Market Analyst at Interactive Brokers LLC

Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

About the Author
Andrew Wilkinson

Andrew is a seasoned trader and commentator of global financial markets. He worked for several London-based banks trading cash and derivatives before moving to the U.S. to attend graduate school. Andrew re-joins Interactive Brokers following a two-year stretch at a major Wall Street broker-dealer as their Chief Economic Strategist. His coverage of stocks, options, futures, forex and bonds regularly surfaces in global media, and over the last several years Andrew has made many TV appearances on Bloomberg, BBC, CNBC and BNN and Yahoo Finance.

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