The euro remained stronger than the dollar in the US session after being lifted in the previous session on upbeat market sentiment that Greece is working on trying to satisfy requirements to be eligible for international aid following a productive conference call with the IMF-EU. A second call today is expected to be as productive. What gave an added boost to risk sentiment today was speculation the US Federal Reserve will act to stimulate growth and is expected to reveal at the end of its two day policy meeting on Wednesday that it will introduce quantitative easing (QE3). However QE3 results in weakening dollar value due to “printing” more money. But it increases the value of risk currencies (like euro) as risk appetite increases. EURUSD opened the US session at 1.3689 and traded in a range until it closed at 1.3672.
GBPUSD opened the session at 1.5698 and rallied to 1.5736 benefiting from risk appetite and a weaker dollar.
The Swiss franc weakened sharply after Switzerland’s growth and trade data showed a growing impact on the country’s economy from a strong currency, fuelling speculation the Swiss National Bank may lift the floor for the euro versus the franc, to lift its euro intervention target to 1.25 from 1.20 CHF. The euro and dollar both gained. EURCHF jumped to a US session high of 1.2211 from a low of 1.2057. USDCHF shot up to a high of 0.8920 from a low of 0.8789.
The Canadian dollar initially remained slightly weaker against its U.S. counterpart, trading in a holding pattern weighed down by concerns of global growth and weak US data as well as lower crude oil prices. Crude is Canada’s main export. The loonie was relatively unaffected by a dovish speech by the Bank of Canada chief Mark Carney. USDCAD opened New York at 0.9913 and hit a session high of 0.9946.
The yen rose against the dollar which was broadly weaker after data showed new construction of U.S. homes fell more than expected in August, dragging on economic growth. USDJPY fell from a session high of 76.70 down to 76.34.
Gold bounced off a session low of $1,775.75 to climb to $1,811.42 as the safe haven asset was in demand today after The International Monetary Fund warns that Europe and the United States could slide back into recession by next year if they do not take immediate action to tackle economic problems and cut its forecast for global growth to 4.0 percent for this year and nex. A downgrade to Italy’s credit rating added to euro zone debt concerns, and also weak US housing data showed how growth in the US economy is still faltering.