Currency Updates:
The US dollar edged higher against a basket of currencies on Friday supported by a heightened risk aversion in the market. Versus the Japanese yen, the dollar rallied to 77.79 from 77.16. On Monday, Bank of Japan Governor Shirakawa warned that the Japanese economy will remain slow as Europe’s debt crisis escalates and signaled that the central bank will remain ready for further monetary stimulus if needed. Focus now turns to the US New Home Sales expected at 15 GMT.
The euro edged lower on Friday in thin holiday trade after a weak Italian bond auction. Italian government bond yields soared to euro-era highs climbing above 8%. Investors fear about the country’s ability to raise funds from the market at affordable rates and the consequences of a potential shutdown in the Italian bond market. The European Central Bank intervened in the bond market on Friday buying Italian and Spanish debt but it appears that the central bank’s action is no longer sufficient to stop a wave of selling. Rating agency Standard and Poor’s downgraded Belgium by one notch to AA citing a slowing economy and political instability. On Monday, the euro rebounded after an Italian Newspaper said the International Monetary Fund was preparing an aid package for Italy in case the situation worsens but the IMF denied such discussion. Against the dollar, the single currency fell as low as 1.3212 but later it rebounded to trade at 1.3342.
The British pound plummeted to 1.5422 from 1.5518 against the greenback on Friday after a speech by the Bank of England Martin Weale. He emphasized on the risk of the UK falling back into recession and said that the central bank is ready to inject more money into the ailing economy.
Oil prices rallied to 98.84 today dollars a barrel from 94.99, a rise of 4.1%. Gold rose to 1708.41 dollars an ounce from 1672.03. Silver jumped to 31.86 dollars an ounce from 30.93.
