Daily Forex Analysis by Finexo.com 29/12/2009

USD

In very light trading due to Japanese and European holidays, the US Dollar was mixed as investors thought about the future of the Dollar after several weeks of rallies. The prospects for the future of the currency depends upon many factors, however the mixed data that has been coming out in recent weeks has investors confused about which direction the US economy is really going. For the moment though, due to the holidays, liquidity is very light and the news flow is very thin. There is no real direction for the Greenback at the moment and probably will not be until next week.

At 10:30PM GMT, the US Dollar was trading up .08% against the Euro to 1.4383, up .43% to the Japanese Yen to 91.57, down .34% versus the British Pound to 1.6001, down .91% against the Canadian Dollar to 1.0423, down .31% to the Aussie to .8867 and down .13% versus the Swiss Franc to 1.0345.

The ICE Futures Dollar Index, a non-traded indicator of the Dollar’s value against six major currencies has been up almost 4% so far in December, on its way to the for its best monthly performance since February. At 10:43PM GMT, the index was at about 77.03, off a 3 ½ month high of 78.449 set last week.

Food for thought for 2010

The US Treasury is also auctioning off about 118 Billion Dollars worth of 10 year debt obligations, which is likely to cause the yields on all US Treasuries to rise. While it is a light market now, the auction will likely have some effect on the USD’s performance this week. The yields on the 10 years are close to 3.95%, however Morgan Stanley is predicting 5.5% yields by the end of 2010, a disaster for US homeowners who will see their mortgage rates rise to as much as 8%. This is a problem for those expecting a recovery based on durable goods, consumer confidence and other “hard” data as the more the yields rise, the less likely we are to see a vigorous recovery.

Written by Finexo.com