Japanese yen – The dollar’s advance still left it weaker against the yen on growing risk aversion buying with the key spot rate trading at ¥77.02. Earlier in the overnight session the dollar traded with a gain and remained close to its best level in two weeks. Demand for the yen remained high with the unit making an advance of at least 1% against all of its major partners earlier in the session. Gains were, however, pared even as European stocks built on losses of 2.3% for Asian equities and as anxieties built ahead of U.S. trading. The yen rose against the pound to ¥122.19 for its strongest performance since January 2009 when global financial pressures built ahead of a March-time capitulation for equities at least.
British pound – The pound reversed an earlier loss against the dollar rebounding on account of its status as a euro currency alternative. The recent action by the SNB to cap the Swiss franc has bolstered the British unit given the diminishing likelihood of appreciation in the franc. The pound reversed a loss to $1.5794 before turning positive on the session. Sterling recently traded at $1.5874.
Aussie dollar – The Aussie shed about two cents on Monday against the dollar as investors ditched the unit for fear that mounting Eurozone pressures would continue to dull appetite for higher-yielding units. But having said that the yield premium is fast-becoming eradicated through the forwards market. Less than two weeks ago investors priced in a one percent reduction in monetary policy from the Reserve Bank in response to the growing threats to global growth. As the threats deepen investors on Monday moved to predict an escalation in the timetable and scope of monetary policy reduction and now see 140 basis points off short-term rates in the forthcoming year. The Aussie rebounded from a session low at $1.0280 U.S. cents before it steadied at around $1.0319.
Canadian dollar – The Canadian dollar crossed parity for the first time in about a month as risk aversion spread making for the second brief occasion since February 1. As the summer picked up heat and as the credit-crunch took a late July break the Canadian unit had made gains to almost $1.0600 against the greenback. But as fears for growth mount and as speculative flows continue to undermine recent commodity market gains, more sellers are showing up to test the loonie. The unit fell earlier to buy less than a dollar at 99.76 U.S. cents and remains steady at exactly parity in early morning Manhattan trading.
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.