FOREX TRADING

G-20 Signals Green Light To Sell Dollar

The dollar plunged on Monday after G-20 finance ministers did not address the dollar slide and agreed to maintain the stimulus programs for the foreseeable future. UK Chancellor of the Exchequer Alistair Darling said the G-20 had decided to keep interest rates low and maintain record budget deficits until economic recoveries take hold.

Separately, the International Monetary Fund said the US currency may still be overvalued. Dollar carry trades returned while global stocks and commodities surged. Gold rose above $1,100 an ounce, a record high. Dow Jones 30 made a new yearly high. The S&P 500 rose 23.78 to 1,093.08. The yen, while little changed against the dollar, dropped versus other major currencies on improved risk sentiment. The euro rose to the 1.50 handle on stronger-than-expected German industrial production and improving EMU investor sentiment. Sterling gained for a sixth consecutive day. The Australian and Canadian dollars were supported by gains in risky asset prices. Canadian housing starts climbed to the highest level this year while Australian data were mixed.

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No Call For A New Reserve Currency From The G-20

Growth will come from multiple sources

USD traded mixed Monday as the G-20 meeting ends without a fresh call to replace the USD as the world’s reserve currency. G-20 officials announced Friday that the G-20 will supplant the G-8 as the international economic council and include developing nations like China, Brazil and India. The G-20 proposes a comprehensive approach to rebalancing the global economy which will include assessments of fiscal and monetary policies, trade and Forex. The G-20 also pledged to increase representation of emerging market and developing countries. The G-20 communiqué made no mention of USD reserve status. World Bank President Robert Zoellick says the US should not take for granted USD status as the world’s reserve currency. Zoellick said there are a number of options emerging and that the G-20 meeting presents a good start towards increased global cooperation. According to Zoellick forces are shifting and now is the time to prepare for the fact that growth will come from multiple sources. Reuters reports that Zoellick said ‘we need a system of international political economy that reflects a new multi polarity of growth.’ (more…)

Weekly Economic and Financial Commentary

U.S. Review

A Huge Week for Policy Announcements

• The U.N. General Assembly, G-20 and FOMC meeting overshadowed this week’s economic news. Stimulus efforts remain in place but some programs are approaching expiration and plans were announced for an orderly winding down of the Fed’s quantitative easing.
• This week’s key economic news included reports on new and existing home sales. New home sales rose 0.7 percent, whereas existing home sales fell 2.7 percent.
• Weekly first-time unemployment claims fell more than expected, dropping 21,000 to 530,000. (more…)