Daily Forex Analysis by Finexo.com 23/12/2009

USD

The US Dollar continued to do well in very light trading on Tuesday, holding on to meager gains in response to a moderate rise in US Treasury Bond yields. The Dollar did have a hard time getting past the Yen and Euro though, after concern over the recent GDP figure adjustment sent some traders out of the greenback. The US Department of Commerce revised last month’s GDP data which showed a 2.8% growth for the third quarter. The revision shows a 2.2% growth rate whereas market analysts predicted the 2.8% would remain. Data also showed that existing home sales in the US rose and unexpected 7.4% in November, a three year high. Although the news appeared good, the excitement was muted by the disclosure that home prices have fallen to their lowest level since 2005 and that much of the home purchasing was done with grants and subsidies fro, the Federal Government.

The market is not sure when the economy will recover; there are many different pieces of data out there contradicting one another. As the recent USD rally was based on short-coverings, traders are sizing up their options for the next year and hedging themselves against any possibility.

At 10:00PM GMT, the US Dollar was trading down .04% to the Euro to 1.4278, up .55% against the Japanese Yen to 91.67, down .4% versus the British Pound Sterling to 1.5961, down .3% to the Canadian Dollar to 1.0589, down .33% against the Australian Dollar to .8783 and up .26% versus the Swiss Franc to 1.0489.

JPY

The Japanese Yen was down across the board as investors continued to analyze last week’s declaration of a “war on deflation.” Tuesday saw Bank of Japan Governor, Masaaki Shirakawa, reaffirm that stance in comments to a local media outlet saying that the BOJ will maintain its current “effective zero interest rates” and is ready to act promptly to fight deflation. Japan, an export reliant economy is being hurt by the recent rise in Yen value at a time when the major consumers of Japanese products, the US, Europe and Great Britain, are having issues maintaining strong currencies. What this means is that the trade gap between these nations widens even though actual exports from Japan is less, making a perfect deflationary storm very possible.

At 10:20PM GMT, the Japanese Yen was trading down .6% against the Euro to 130.91, down .33% versus the British Pound to 146.57, down .3% to the Australian Dollar to 80.55 and down .55% against the Swiss Franc to 87.52.

Written by Finexo.com