Dollar Extends Losses - 24.10.2011

US Dollar The dollar weakened on Friday against all its major counterparts and extended losses against the Australian, Canadian peers as well as the pound and the euro in Asian trading hours today. The currency’s depreciation was accompanied by a surge in global stock markets and rising commodities prices and was supported by speculations the Federal Reserve will consider more measures to boost the economy. The US economy expanded at a 2.5% annual pace in the third quarter, according to preliminary estimations before the government report is released on October 27, following a 1.3% gain in the second quarter and a 0.4% increase in the first one. The growth however failed to decrease high unemployment which is staying at 9.1%, while the Fed Vice Chairman Janet Yellen said recently that a third round of large scale securities purchases might become warranted if necessary. The dollar index, which tracks the unit against six currencies of the major US trading partners, fell this morning to the lowest level since September 15 – 76.20. Euro The single currency accelerated 4-day gains against the greenback after European leaders discussed yesterday their common strategy to ensure financial stability of the euro zone, setting the October 26 meeting as a deadline to complete a plan to expand the firepower of the European Financial Stability Facility, reduce Greece’s debt without triggering a default and protect banking system. “We have discussed options for increasing the firepower of the EFSF,” European Commission President Jose Barroso said. “I’m sure that progress can be confirmed on Wednesday.” Measures being considered include a boost in the rescue fund to 940 billion euros, deeper but “voluntary” writedowns on Greek debt, and approval of stricter financial requirements for banks. The euro has already touched today the highest level against the dollar since September 8 – 1.3950. Japanese Yen The yen rose on Friday to another record high against the dollar forcing financial authorities to resort to a verbal intervention. Japanese Finance Minister Jun Azumi said today that the currency’s climb to a new postwar high was “extremely unfortunate” and promised to take “decisive” actions if needed as the moves are “clearly speculative and don’t reflect economic fundamentals at all.” Despite the currency’s strength Japanese exports rose by 2.4% on the annual basis in September, more than economist initially estimated. The government meanwhile approved last week a 12.1 trillion-yen spending plan to support economic recovery after the March disaster. The package includes 2 trillion yen to help companies cope with the higher yen, with subsidies planned for building plants in Japan and hiring workers. Today the pair USD/JPY rose to 76.47 from the Friday’s low 75.77. Australian Dollar The Aussie is showing a strongly positive dynamics against the greenback on global investors’ optimism and favorable manufacturing statistics from China. The Australian currency reached the highest level since September 9 versus the US counterpart by the end of the Asian trading session today – 1.0425, despite reports showed today that producer prices rose less than economists expected. The PPI advanced by 0.6% in the third quarter slowing the annual growth pace to 2.7% from 3.4%. The Reserve Bank of Australia, keeping interest rates at the highest level in the developed world – 4.75%, indicated that the October 26 CPI report would help determine whether there was scope to cut rates.