Dollar Broadly Higher On US Economic Stimulus Reports
TORONTO (Dow Jones)--The U.S. dollar is broadly higher and is recording sharp gains against the euro Monday morning as reports circulate about the substantial size of the economic stimulus package contemplated by President-elect Barack Obama.
The U.S. currency has been bolstered by news the incoming administration is considering proposals to stimulate the U.S. economy with a $775 billion stimulus package, including a $300 billion tax cut, analysts said.
"To the extent that there is any news behind it, I guess all we can really point to is the evolving Obama stimulus package," said Adam Cole, head of foreign exchange strategy at RBC Capital Markets in London.
The large gains by the dollar also reflect continued illiquid conditions in currency markets, he added.
Liquidity is likely to remain thin in the next few sessions, he said.
The euro is being undermined by reports that Italian authorities are considering suing the banks that helped them to manage bonds taken out in the 1990s.
The euro was at $1.3594 from $1.3857 late Friday afternoon, according to EBS. The dollar was at Y93.20 from Y92.30, while the euro was at Y126.71 from Y127.78. The U.K. pound was at $1.4487 from $1.4480, while the dollar was at CHF1.1062 from CHF1.0826 Friday.
A report from Brown Brothers Harriman in New York said that, after coiling like a spring against the yen in a JPY90-JPY91 trading range, the dollar snapped out before the weekend and has seen follow-through buying Monday.
"Japanese economic data has simply been horrible in recent weeks, suggesting a deeper contraction than policy makers and investors may have anticipated," the report said.
At 10:00 a.m. EST (1500 GMT), U.S. construction spending data for November will be released. Economists expect a 1.2% decline in new construction activity from the previous month.
Elsewhere, a continued firm performance by energy prices was helping underpin commodity currencies, as tensions in the Middle East continued to increase and Russia and Ukraine remained at loggerheads.
"With the latter standoff intensifying over the weekend and little immediate prospect of an end to fighting in the Gaza Strip, commodity currencies such as the Australian, New Zealand and Canadian dollars are likely to extend their gains early this week," said Daragh Maher, deputy head of global foreign exchange strategy with Calyon Credit Agricole in London.
While those currencies were slightly lower against the resurgent U.S. dollar Monday morning, they were outperforming the euro and the yen.
The U.S. dollar was trading at C$1.2161 from C$1.2154 late Friday afternoon.
A report from TD Securities said the Canadian dollar is picking up some support in cross trading against the euro and the yen, which should contribute to buying interest in the Canadian dollar against its U.S. counterpart in the short term at least.
-By Don Curren, Dow Jones Newswires; 416-306-2020; don.curren@dowjones.com
(Nick Hastings in London contributed to this article.)
(END) Dow Jones Newswires
January 05, 2009 09:09 ET (14:09 GMT)
Copyright 2009 Dow Jones & Company, Inc.
By Don Curren
Of DOW JONES NEWSWIRES
TORONTO (Dow Jones)--The U.S. dollar is broadly higher and is recording sharp gains against the euro Monday morning as reports circulate about the substantial size of the economic stimulus package contemplated by President-elect Barack Obama.
The U.S. currency has been bolstered by news the incoming administration is considering proposals to stimulate the U.S. economy with a $775 billion stimulus package, including a $300 billion tax cut, analysts said.
"To the extent that there is any news behind it, I guess all we can really point to is the evolving Obama stimulus package," said Adam Cole, head of foreign exchange strategy at RBC Capital Markets in London.
The large gains by the dollar also reflect continued illiquid conditions in currency markets, he added.
Liquidity is likely to remain thin in the next few sessions, he said.
The euro is being undermined by reports that Italian authorities are considering suing the banks that helped them to manage bonds taken out in the 1990s.
The euro was at $1.3594 from $1.3857 late Friday afternoon, according to EBS. The dollar was at Y93.20 from Y92.30, while the euro was at Y126.71 from Y127.78. The U.K. pound was at $1.4487 from $1.4480, while the dollar was at CHF1.1062 from CHF1.0826 Friday.
A report from Brown Brothers Harriman in New York said that, after coiling like a spring against the yen in a JPY90-JPY91 trading range, the dollar snapped out before the weekend and has seen follow-through buying Monday.
"Japanese economic data has simply been horrible in recent weeks, suggesting a deeper contraction than policy makers and investors may have anticipated," the report said.
At 10:00 a.m. EST (1500 GMT), U.S. construction spending data for November will be released. Economists expect a 1.2% decline in new construction activity from the previous month.
Elsewhere, a continued firm performance by energy prices was helping underpin commodity currencies, as tensions in the Middle East continued to increase and Russia and Ukraine remained at loggerheads.
"With the latter standoff intensifying over the weekend and little immediate prospect of an end to fighting in the Gaza Strip, commodity currencies such as the Australian, New Zealand and Canadian dollars are likely to extend their gains early this week," said Daragh Maher, deputy head of global foreign exchange strategy with Calyon Credit Agricole in London.
While those currencies were slightly lower against the resurgent U.S. dollar Monday morning, they were outperforming the euro and the yen.
Canada Morning
The U.S. dollar was trading at C$1.2161 from C$1.2154 late Friday afternoon.
A report from TD Securities said the Canadian dollar is picking up some support in cross trading against the euro and the yen, which should contribute to buying interest in the Canadian dollar against its U.S. counterpart in the short term at least.
-By Don Curren, Dow Jones Newswires; 416-306-2020; don.curren@dowjones.com
(Nick Hastings in London contributed to this article.)
(END) Dow Jones Newswires
January 05, 2009 09:09 ET (14:09 GMT)
Copyright 2009 Dow Jones & Company, Inc.
