Monday November 20, 2006 - 11:34:41 GMT
Share This Story
INVESTICA Ltd - www.investica.co.uk
Dollar back on the defensive
The US currency could be vulnerable to heavy selling pressure if there is a forced capitulation in carry trades, although the underlying yield structure will help cushion the dollar if risk tolerances stabilise. The key factor is still that the dollar is liable to see strong selling pressure on any significant recoveries.
The dollar strengthened to near 1.2760 against the dollar on Friday, but was unable to make further headway and weakened in US trading as poor data and market rumours undermined the US currency. The US currency weakened to lows near 1.2845 before stabilising as the currency was also undermined by an unwinding of short positions in the yen and Swiss franc.
The US housing data was weak with a 14.6% drop in starts for October to a six-year low with an annual rate of 1.49mn while permits fell 6.3% to 1.53mn. The data will revive concerns over the housing outlook and the potential for a deterioration in the wider economy. The dollar was initially resilient after the data, but weakened sharply after rumours that a major hedge fund was in serious trouble and was selling the dollar to cover losses incurred in the commodity markets.
Data influences will be reduced during this week with trading also dampened by the US Thanksgiving holiday and this may encourage narrow ranges. Markets will, however, need to be on high alert over the risk of increased volatility.
The ECB has maintained a tough stance with bank member Papademos calling for extreme vigilance on inflation and these comments were reiterated by Chairman Trichet. Euro gains will still be restrained by the potential for warnings over currency strength from European officials.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."