The Obama administration’s proposed banking regulations and the delay in the Senate’s vote to reconfirm Ben Bernanke as Federal Reserve chairman capped a week of negative news for riskier assets, after revived concerns over Greece’s sovereign debt and speculation that China will take further steps to tighten monetary policy triggered the flight to safe-haven assets.
“We’re ending the week in a sour and uncertain note,” Richard Franulovich, senior currency strategist at Westpac Banking Corp. in New York told Dow Jones.
In that environment, assets and currencies viewed as safest, particularly the yen, benefits, he said. The dollar dipped at one point to Y89.78, the lowest since Dec. 18, while the euro sank to a nearly nine-month low of Y126.55.
Late Friday afternoon in New York, the euro was at $1.4138 from $1.4097 late Thursday, according to EBS via CQG. The dollar was at Y89.92 from Y90.33, while the euro was at Y127.10 from Y127.27. The U.K. pound was at $1.6100 from $1.6115. The dollar was at CHF1.0415 from CHF1.0426. The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 78.280 from 78.395. As a result, Deutsche Bank’s PowerShares US Dollar Index Bearish (UDN) exchange-traded fund was up 0.22% from late Thursday, while its PowerShares US Dollar Index Bullish (UUP) was down 0.17%. The two exchange-traded funds are based on Deutsche Bank currency futures indexes, whose composition mirrors that of ICE’s Dollar Index.
The euro gained against the dollar, even though it faces its own problems over sovereign-debt worries in Greece.
Because of those debt worries, the euro’s gains are likely to be limited, said Jacob Oubina, currency strategist at Forex.com in Bedminster, N.J. “Europe is riddled with all kinds of debt problems, but the U.S. dollar” is under pressure of its own “from the draconian Obama proposals,” Oubina said.
After China reported that its economy expanded at a faster pace in the fourth quarter of last year, investors fretted that China would take additional steps to tighten monetary policy, including raising the amount of deposits banks must keep on reserve as well as boosting the yield on three-month bills that it sells to financial institutions.
”I think the bottom line here is it’s thrown the health of the recovery into a state of flux,” said Andrew Wilkinson, senior market analyst at Interactive Brokers in Greenwich, Conn.
The commodity-backed Canadian currency fell on the dollar after Canadian retail sales decreased 0.3% in November from October–the first drop in four months.
Meanwhile, investors were keeping an eye on the Swiss franc after Swiss National Bank President Philipp Hildebrand reiterated Friday in an interview with The Wall Street Journal that the SNB would fight any “excessive” appreciation of the Swiss currency.
With the euro-zone struggling with fiscal problems on its periphery, most acutely in Greece, the franc has faced more upward pressure recently because it is seen as a “flight-to-quality” currency.
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