Forex major currency

The dollar is generally lower Tuesday morning as major currency pairs reflected continuing risk appetite and tracked stock futures in early trading in the absence of any critical U.S. economic data or other market-moving developments.

After slipping against the greenback in European trading, the euro and other major currencies shifted higher as North American trading picked up, largely following the trading pattern in stock market futures, said Adam Cole, chief currency at RBC Capital Markets in London.

“Having sold off overnight, which was propping the dollar up, they’ve steadily rallied back up towards the highs again, and that has the dollar under pressure,” he said.

A subsequent shift lower in stock futures helped erode some gains by non-U.S. currencies.

The euro scrambled to $1.4284, its highest level since Dec. 29, according to EBS, before ceding some of its advance.

One large order to buy euros that hit the market in early North American trading also helped bolster the common currency.

News that the euro zone unemployment rate rose to 9.2% in April from 8.9% in March, above the forecast 9.1%, had little apparent impact on the market.

While the market has a steadier, more consolidative tone than some recent sessions, investor appetite for risk persisted, keeping the Australian and New Zealand dollars near the multi-month highs they achieved Monday.

In midmorning trading, the New Zealand dollar reached a high of 65.33 U.S. cents, its highest level since Oct. 2, according to EBS.

The pound reached a seven-month high at $1.6449 but then surrendered much of its gains after news from the U.K.

A report from Camilla Sutton, currency strategist at Scotia Capital, said market players were concerned with the gilt auction in the U.K., and then news that Abu Dhabi’s IPIC said it’s selling 1.3 billion of its Barclays shares.

Tuesday morning, the pound is at $1.6434 from $1.6438, according to EBS. The euro is at $1.4232 from $1.4150. It’s at Y136.08 from Y136.67. The dollar is at Y95.62 from Y96.65 late Monday in New York, and at CHF1.0626 from CHF1.0716

RBC’s Cole said the selling pressure on the dollar is likely to remain the dominant theme in currency markets Tuesday.

“The momentum behind the dollar sell-off does seem very robust at the moment, and I think it’s a question of identifying something that will stop it rather than something that justifies it continuing,” he said.

However, recent data of the Federal Reserve’s custody holdings suggest that foreign appetite for U.S. paper remains strong.

In the case of China, there appears to be little risk of the country reducing its purchases as this would lower the value of its current holdings in the U.S. market.

“The symbiotic relationship between the U.S. and China means that such a self-defeating policy would clearly be untenable,” said Mitul Kotecha, head of global foreign exchange strategy at Calyon Credit Agricole in London.

Meanwhile, custody holding data for official foreign investors show that the four-week moving average has risen to $68.8 billion in recent weeks, the highest since the start of the year. Also, the uptake by foreign central banks at Treasury auctions has been in the 31%-42% range, well above the 27% average for the whole of 2008.

“Taken together it provides yet more evidence that foreign official investors haven’t shifted away from U.S. bond despite the rhetoric,” Kotecha said.

Canada Morning

The Canadian dollar is higher Tuesday morning, but remains below the eight-month highs achieved Monday.

There are no significant economic releases in Canada before the Bank of Canada’s policy announcement Thursday.

A report from BMO Capital Markets said the market is unanimous in its expectations that the bank will leaves rates unchanged at 0.25%, but will be looking for any indications as to whether the bank may embark on quantitative easing.

Overall, the longer term risks still remain skewed to the downside for the U.S./Canadian dollar pair, it said.

The U.S. dollar is trading at C$1.0835 from C$1.0896 late Monday.

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This entry was posted on Tuesday, June 2nd, 2009 at 10:43 pm and is filed under Forex. You can follow any responses to this entry through the RSS 2.0 feed.