Dollar firms as confidence wanes

Japanese yen – Bank of Japan Governor Shirakawa described the health of the economy as being in “sever state” in an address to politicians in Tokyo. The government said it had asked for flexibility from the central bank in returning appropriate policy responses and said that the Bank would maintain a careful watch on developments in the foreign exchange market. The market took today’s cloaked warning of further monetary expansion along with a dip in consumer confidence last month as bearish for the yen and drove the dollar higher to ¥81.76.

Aussie dollar – Buyers of the Aussie dollar followed the same path as those driving the British pound higher. At the Reserve Bank’s latest meeting we learned that the central bank felt some upwards rate adjustment was likely necessary. The release of the official minutes confirmed that under certain circumstances the RBA would shift from its cozy 4.75% and self-described ‘mildly-restrictive’ stance on monetary policy. Those conditions infer a weakening of the exchange rate, which yet might at least delay a further monetary adjustment and at worst eradicate its need if the Aussie dollar’s strength kept inflation within target. The daily gain to as high as $1.0617 U.S. cents was gradually eroded as the unit slid all the way to $1.0537 before rebounding to $1.0561 cents.

Canadian dollar – Earlier confidence in equities and the thought of a rebound in commodities has turned to naught and at the same time weighed heavily on the domestic dollar. The Canadian unit got off to a bright start only to weaken as the morning wore on and currently buys $1.0233 U.S. cents.

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.

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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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