Dollar dropped as investors take on risk

Aussie dollar –The Aussie reached its highest in three days against the U.S. dollar on signs that exports within the Asian region were buoyant following an annual 13.3% pace of increase in Chinese industrial production. Retail sales also expanded at a brisk pace growing year-on-year by 16.9%. Consumer prices in May, however, matched an April reading of 5.5% and remain at the highest in three years. Investor sentiment failed to take a bruising after the Peoples Bank announced a move to left the reserve requirement ratio to its highest yet in a move aimed to stem lending. The market is also abuzz with talk that the Bank will tighten interest rates in coming weeks. The yuan was also allowed to appreciate Tuesday. A Manpower employment survey across the region showed employers expectations were tempered in China, Australia and Japan. The Aussie rose to $1.0667 U.S. cents.

Canadian dollar – The stronger appetite for risk on Tuesday boosted the Canadian dollar and even after the promise of additional weekend supply from OPEC, the price of crude is also higher on the day. The Canadian unit has surged to $1.0323 U.S. cents.

British pound – Consumer prices rose by 4.5% in May matching the pace of increase in the previous month. Prices remain at the highest recorded reading since October of 2008. However, after several months of battling with the Bank of England, investors are more inclined these days to agree that rates don’t yet need to rise. The pound was boosted by the return of risk appetite and matched gains made by the euro versus the dollar.

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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