Dollar at Two Month High Against Yen
The US dollar hit a two month high against the Japanese yen as encouraging data showed increased consumer confidence and rising home prices. The Conference Board’s confidence index rose to 52.9 and a Standard & Poor’s Case-Shiller report showed that median home prices increased for the fifth consecutive month in October. Fabian Eliasson of Mizuho Corporate Bank Ltd. in New York stated, “The dollar is thriving on good news. It’s a continuation of an overall reversal in dollar sentiment that started a while back and was reiterated by the good recent numbers.”
US to Outperform Other Economies
The Japanese yen, traditionally seen as a safe haven currency and widely used to finance carry trades, declined against 16 major currencies pressured by a rise in risk appetite. The dollar gained on speculation that Tuesday’s consumer confidence report will be positive for the US economy and show that the US is recovering from the global recession. Geoffrey Yu of UBS AG said, “The U.S. is probably going to outperform many economies. That’s why we have a view on a stronger dollar. Throughout 2009, the market has been overpricing the downside U.S. economic risk.” The dollar vs. yen rate rose 0.4% to 91.62 yen and the dollar traded at $1.4382 against the euro. The euro has suffered recent declines due to investor concern about the health of the EU banking sector.
Risk Appetite Pushes Euro and Aussie Higher
The high yielding Aussie dollar gained a full 1.2% rising to a 12 day high of $0.8984. The New Zealand dollar gained 1.3% trading at $0.7180. The Australian Reserve Bank raised rates three quarters of a percentage point to 3.75%. Holiday trading remains thin and most analysts are wary of drawing long term conclusions based on recent market moves. Christian Lawrence of RBC Capital Markets stated, “With so little in the way of data and not many people around the market has gone back to what it is familiar with and is trading on the back of stronger risk appetite, which is pushing the euro and higher-yielding currencies higher.”
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