** YoY = Year over Year ** MoM = Month over Month |
USD The flight from the Dollar amidst continued optimism about the global recovery fueled by more positive data helped bring the Dollar to its lowest levels in over a year against a basket of major currencies. Investors are walking two lines, one that economy is getting better and that lends to a more stable risk environment and the second that the US’s policies and overall growing debt will hurt the Dollar in the coming future. Consumer sentiment in the US rose to its highest level since June, at 70.2. The number was slightly higher than expected and points to expectations that retail sales will follow suit in the coming months. To keep things into perspective though, when this number unexpectedly rose this past June, it was not followed by a significant boost in sales in July or August. At the close, the US Dollar was down for a fifth straight week, against the Japanese Yen to 90.71, a 1.1% drop. Down .08% to the Euro to 1.4568, a 3 ½ month low, down .05% to the British Pound to 1.6657, down .04% against the Canadian Dollar to 1.0765, down .43% to the New Zealand Dollar to .7069, down .01% to the Swiss Franc to 1.0381 and up .05% to the Aussie to .8634 – although the Australian Dollar still had significant gains on the week against the USD. AUDJPY and AUDUSD - out of sync The USD has broken strongly to the downside recently. This divergence is very evident in the comparison of the AUD/USD and AUD/JPY pairs shown in today's chart - which tracks AUD/USD and AUD/JPY on an indexed basis since mid-2007 and shows the two pairs' rolling 40-day correlation. AUD/USD has touched new highs for the cycle recently, while AUD/JPY remains well off its highs for the cycle and has been in a back and forth pattern over the last few weeks. There is no consistent pattern as to which pair is the leading indicator, but we have a hard time imagining that this kind of divergence can continue for long. Either JPY must join the USD in the ranks of the weaklings among the G-10, or the USD needs to find strength. |
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