The euro extended its gains against the dollar into the U.S. session, gaining another 1.5 pips after opening at 1.4319 and rising to a high of 1.4452. Since the late European session, the euro was boosted by market chatter that the European Central Bank was buying peripheral bonds from indebted EZ countries like Italy. The Single Currency plummeted yesterday due to concerns that European banks may lack capital due to their significant exposure to euro zone debt. Today euro was also boosted by rising speculation that some kind of measures will be introduced by the Federal Reserve on how to help ease the financial market turmoil when they meet next Friday at an economic conference in Jackson Hole, Wyoming.
GBPUSD extended gains early in New York trading, rising to a session high of 1.6616 from the open of 1.6502 but soon pared all gains to fall to 1.6472. Initially, the pound gained as investors realized that compared to the U.S. and Europe, the U.K. is more stable from a political and ratings perspective, so Sterling is the preferred currency versus euro and dollar. But gains were capped as risk aversion still exists due to uncertainty over a possible global recession and investors preferred to unwind positions ahead of the close of markets for the weekend.
The safe-haven Swiss franc continued to gain against the broadly weaker dollar in the U.S. session. USDCHF opened at 0.7902 and fell sharply to 0.7806 before a slight rebound to consolidate. With alot of uncertainty in the markets recently, investors prefer to park their investments in a safe harbour over the weekend..
Yen reached its highest level on record against the dollar as financial markets were rattled, with global stock markets tumbling on fears that the global economy may be sliding back into a recession. This combined with growing concerns over the European sovereign debt crisis had investors feeling to the relative safety of the Japanese yen. USDJPY opened at 76.47 and plunged to a record low 75.95. Surprisingly the Bank of Japan has not intervened yet since their intervention two weeks ago but a Wall Street Journal report cited Japan’s top currency official said Japanese authorities do not plan to intervene often.
The Canadian dollar strengthened against its U.S. counterpart for most of the session as it was boosted by positive and reassuring remarks from Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty during a meeting in Ottawa. They both stated that the government is ready to intervene in the economy to deal with any issues in case of major global economic turmoil. While acknowledging risks posed by the euro zone debt crisis and the slow U.S. recovery, they both downplayed the risk of a global recession. Meanwhile, prior to their meeting, Canadian inflation data for July were released suggesting no inflation pressures in the near term. USDCAD opened at 0.9911 and fell to 0.9824. Also oil prices were up in the session, which influenced the direction of Canada’s commodity-linked currency.