Euro Breaks through 1.3400, but Can’t Maintain

EuroEarlier, euro broke through the 1.3400 level against the US dollar. Optimism from the Italian bond auction helped the 17-nation currency, sending it surging. However, euro has been unable to maintain the rally.

Instead, EUR/USD has dropped back below the 1.3400 level, and is, in fact, lower than it was at open. The gains made earlier in the session has pretty much been erased. There were some hopes following the Italian bond auction, but since then the euro has struggled.

Italian bonds did sell reasonably well, with the upper target nearly being reached, and the new three-year bonds selling reasonably well. However, the bonds also came with high yields not seen for Italian bonds since the beginning of the euro era.

The news injected some optimism into the Forex market, helping the euro. However, things quickly turned as Forex traders considered the wider implications of the situation. Even though Italy has been able to sell much of its debt, there are still problems with sovereign debt in the eurozone. Investors may be focusing a great deal on holiday shopping right now, but it’s telling about the euro that it is one of the few major currencies struggling against the US dollar today.

At 14:32 GMT, EUR/USD is lower at 1.3313, down from the open at 1.3319, and off from the high at 1.344. EUR/GBP is lower at 0.8533, down from the open at 0.8586/ EUR/JPY is lower at 103.5985, down from the open at 103.8770.

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Another Day of Gains for Rand?

South African randThe South African rand gained today as the positive mood prevailed on the Forex market, but later reversed its trend and currently almost erased its earlier gains.

The explanation for such reversal may be the fundamentals that don’t support the positive outlook. South Africa’s economy grew 1.4 percent in the third quarter, less than economists predicted. Citigroup Inc. cut China’s growth estimate for the next year from 8.7 percent to 8.4 percent. The rand still attempts to rebound on the talks about the improving situation in Europe. The European finance ministers are meeting today to discuss the steps for boosting the European Financial Stability Facility.

USD/ZAR opened today at 8.3660, fell to 8.2420 intraday and rebounded to 8.3310 as of 15:11 GMT. Currently, the rand attempts to regain its strength, but success is limited.

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US Dollar Index Drops on Optimism

US DollarThe US dollar index is dropping as optimism returns to the Forex market. High beta currencies are gaining as the Italian bond auction restores some equanimity to Forex traders.

Earlier, an Italian bond auction was deemed successful, even though yields were high. A great deal of the debt in question was bought, and it turned out to be a bigger success than last week’s German bund auction. As a result, Forex traders are hopeful.

There is no need for the stability of the US dollar right now, as traders look to riskier assets for higher yields. Even the euro, a currency that was struggling earlier, is turning around and heading higher against the dollar.

For now, it’s all about risk. Equities are higher on the optimism related to a strong holiday season. Cyber Monday and Black Friday were both great successes, and that is helping equities. Commodities are also higher, with oil prices rising, and gold prices firming. Higher commodities will put pressure on the US dollar, since they often move inversely to each other.

At 16:22 GMT, the dollar index is lower at 78.9800. EUR/USD is higher at 1.3331, up from the open at 1.3319. GBP/USD is higher at 1.5619, up from the open at 1.5508. USD/JPY is lower at 77.8520, down from the open at 77.9825.

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Earlier News About the US Dollar:

Canada’s Dollar Rallies to Two-Month Record vs. Euro

Canadian DollarThe positive sentiment is still present on markets, allowing the Canadian dollar to rise, reaching the highest level since September against the euro.

The improving outlook for Europe was followed by the favorable news from the United States (the biggest trading partner of Canada). The US consumer confidence index improved from 40.9 in October to 56.0, ending its decline. The good sales during Thanksgiving holiday period were also positive.

The positive mood was felt almost everywhere. The Standard & Poor’s 500 Index gained 0.2 percent. The Standard & Poor’s/TSX Composite Index rose 0.6 percent. Futures on crude oil, the main export of Canada, advanced as much as 2.2 percent to $99.86 per barrel in New York.

USD/CAD was down from 1.0343 to 1.0303 today as of 21:14 GMT and the intraday low was 1.0257. EUR/CAD dropped from 1.3778 to 1.3736, falling for the fifth straight session, while earlier today it reached 1.3705 — the lowest prices since September 22. CAD/JPY went higher from 75.34 to 75.50.

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Mexican Central Bank Plans to Support Peso

Mexican PesoThe Mexican peso advanced today as the nation’s central bank pledged to support the currency in case it would decline too much.

Mexico’s currency exchange commission, which is made up from representatives of the central bank and Finance Ministry, said its going to use $400 million from its $140 billion reserves in case the peso would decline more than 2 percent in one day. The Mexican currency already has slumped 16 percent in the past six months. The Mexican peso is the worst performer among the currencies of Latin America and desperately needs support.

Mexico is not the first emerging economy to be worried about the weakness of its currency and that outlines the interesting difference between emerging economies and developed ones. The developed countries are trying to weaken their currencies, while emerging nations are attempting to support their currencies. The issues are opposite, but the reason for them seems to be the same: the global economic slowdown. The riskier currencies lose their value as investors prefer the safety of the developed nations’ currencies.

USD/MXN was at 13.7890 today as of 00:37 GMT after it fell yesterday from 14.0210 to 13.8120. EUR/MXN was down from 18.4081 to 18.3884.

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