The euro rose for a second day today rising from a four week low on Thursday to gain a total of 1.6 percent on Friday. Risk appetite improved as yields on 10-year Italian government bonds have eased from record highs. Euro rallied even further after Italy’s Senate approved a new budget law which includes debt-reduction measures and paved the way for the formation of an emergency government to replace one led by Prime Minister Silvio Berlusconi. This comes after Greece swore in the interim Prime Minister today, former ECB vice-president, Lucas Papademos. U.S. stocks soared during the North American session on signs of stabilization in Europe, as well as data showing consumer sentiment improved in the US, based on the University of Michigan index, which rose to its highest level in five months in early November as Americans felt better about the economic outlook. EURUSD hit a New York session high of 1.3793 from the day low of 1.3577 this morning in Europe, gaining 1.6 percent this Friday. However on the week, euro lost more, declining 2.7 percent against the dollar.
The British pound ignored domestic UK fundamentals today and was driven by external factors, namely event s in Europe, which dominated the news all week. Under normal circumstances, sterling would have weakened based on speculation of more quantitative easing by the Bank of England to boost the weak British economy. GBPUSD rose to a US session high of 1.6092 rising 1.2 percent from the London session low of 1.5894.
The yen continued to strengthen against the dollar today as USDJPY fell to its lowest level since the BOJ intervention on October 31, touching 77.04. Dollar fell 0.7 percent this Friday and 1.5 percent on the week, recording the biggest weekly decline since the period ended August 14. Meanwhile a broadly stronger euro jumped against the yen today, hitting a US session high of 106.36 versus a session low of 105.45 as the single currency strengthened after the Italian senate vote on austerity measures was passed.
The Canadian dollar strengthened against its US counterpart as optimism increased following news from Europe and prospective action by European leaders to ease the region’s sovereign-debt crisis. Risk assets were buoyed, also lifted by rising commodity prices. Crude oil prices climbed to near US$100 a barrel today. Canada is a major crude oil exporter. The loonie has been strengthening since Thursday, also boosted by a better than expected trade surplus for Canada in September, the most since January. USCAD fell 1.2 percent to 1.0106 from 1.0224.