Dollar sinks as FOMC minutes hint at Operation Twist

Japanese yen – The yen continues to make minor headway against the dollar and rose to ¥76.50 in early New York trading. The dollar is suffering from fears that a further bout of monetary easing will increase its supply, while Japan’s yen has not suffered the same scale of increase seen by the Swiss franc, keeping risk worriers focused on it. The euro also eased to buy fewer yen at ¥110.64. The yen advanced after mixed economic data. On the one hand July’s industrial production came in sharply lower than hoped with a 0.6% increase. The report had shown a healthy snapback in June and was expected to build on that. On the other hand both construction orders and housing starts were strong with the latter coming in at a 955,000 annualized pace with starts gaining by 21.2%.

British pound – Dealers sold the pound following a further slip in a GfK reading of consumer confidence for August. The index lost a further point slipping to -31 although it did beat an expectedly weaker number. The pound reached $1.6262 almost matching the session low from the previous session before rebounding to $1.6325 taking advantage of the softening in the dollar. Against the euro the pound also eased falling to within a penny of its weakest point in three weeks at 88.51 pence.

Aussie dollar – The Aussie continues to find solace in hopes that the global economy will find encouragement in a fix from the Federal Reserve. The unit last month reached a record high versus the greenback but fell from grace as fast-paced investors moved to discount a reversal of monetary policy to aid a stalled global economy. Midweek data showed a 0.7% monthly increase in the take-up of credit within the private sector after a meager 0.1% slip during the month before. Home prices slipped for another month according to a report from RPData-Rismark. Seasonally adjusted home prices fell by 0.6% during July, accentuating a 0.4% dip in June. The Aussie currently trades unchanged at $1.0681 U.S. cents.

Canadian dollar – Bitter-sweet news for the Canadian economy ultimately propelled its dollar marginally higher against an admittedly weaker greenback. A government report showed a second-quarter contraction of 0.4% in the three-months ending June. Analysts had predicted the economy was at a standstill. Revised data showed a lower first quarter growth rate of 3.6%. However, a separate monthly report showed the economy outpaced expectations during June and grew by 0.2% boosting the annual pace to an advance of 2%. The local dollar jumped to a session high of $1.0237 following the data.

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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