Currency Snapshot for Tuesday September 7, 2010

Here are this morning's opening  interbank mid-market rates:

USD/CAD  1.0415                 EUR/CAD    1.3319                     USD/JPY       83.67

GBP/USD  1.5321                 EUR/USD    1.2762                     USD/CHF    1.0109

Commentary:
 

The Euro is on the defensive today on slowing growth in the euro zone and on concerns that the European bank stress test in July were not as strenuous as once thought. With the forex market in risk off mode, the Yen, CHF, and gold have rallied on safe haven flows. German factory orders unexpectedly fell in July, dropping by its biggest level since February 2009. Adjusted for seasonal swings and inflation, orders declined 2.2% from June, when they surged a revised 3.6%. A report in Wall Street Journal highlighting the shortcomings of European bank stress tests in July. According to the report the European Union tested 91 lenders in July, giving 84 passing grades. Some banks excluded certain countries’ debt from their totals, while others reduced amounts to account for short positions they held. This followed comments from Germany's banking association on Monday that the country's 10 biggest banks may need 105 billion euros of additional capital under revamped rules. These issues raise concerns over the amount of capital that will need to be raised under Basel III. Renewed banking sector worries fed into yield spreads between peripheral euro zone. Government bonds and their German counterparts, considered the safest in the euro zone, widen against Portuguese and Irish spreads. In Asia, the Bank of Japan kept the benchmark overnight rate at 0.1 percent. Governor Masaaki Shirakawa  and his board left its bank- loan facility at 30 trillion yen ($357 billion) after boosting the liquidity injections at an Aug. 30 emergency meeting. While in Australia, the AUD declined after Prime Minister Julia Gillard clinched a deal with the backing of key independent lawmakers, allowing her Labor Party to retain government and pursue a tax on mining companies. In Canada, the CAD gave back yesterday's gains with the risk aversion trade on and on weaker oil prices. Tomorrow's interest rate decision by the Bank of Canada will be a close call. Overnight index swaps indicate a 65% chance that they will increase rates by 25bps to 1%. That’s the lowest amount since April 2009, just before Carney introduced a conditional commitment to hold rates through June of this year. 

Disclaimer: Please note that any currency rates/prices contained in this document are indicative, and subject to change without notice. Prices quoted may vary substantially based upon the size of transaction and market volatility.