US Dollar
Asian stocks maintained gains, with Japanese Nikkei Average rising 1.5% by the end of the trading session. Yesterday the major European and US indices rose as well: German DAX gained 3.11% and French CAC 40 increased 2.73%, while finally US S&P 500 gained almost 3%. US Treasuries dropped, on the contrary, as investors boosted demand for higher yielding assets. The yield on 10-year benchmark government debt rose from 1.8% to 1.9%. The reason for such an optimistic mood particularly in the US is behind unexpectedly favorable macroeconomic reports. Yesterday the data showed that both the number of housing starts and building permits increased 9.3% in November, much more than economists expected. Today investors may focus attention on the existing home sales data. According to preliminary estimations, sales of previously owned homes in the US increased 2.2% in November, following a 1.4% gain in the prior month. The dollar extended yesterday’s losses this morning – the currency’s index is currently below 80, the lowest level since December 13.
Euro
Stocks and the euro gained ground as concern about the European debt crisis eased after Spain sold 5.64 billion euros in government bills, more than the maximum target, and German business confidence unexpectedly grew, a report showed yesterday. At the same time Italian and Spanish borrowing costs decreased before the European Central Bank announces today the results of its first tranche of unlimited three-year loans. Investors remained optimistic in the morning amid speculation the facility is spurring purchases of the region’s sovereign debt. The single currency currently trades above 1.31 against the US dollar after yesterday close at 1.3080. Other growth-related currencies, which remain vulnerable to news from Europe and follow the euro’s dynamics, accelerated their gains against the greenback as well. Both the Australian and the Canadian dollars strengthened toward recent local highs.
Japanese Yen
The Bank of Japan decided to keep interest rates unchanged today, as well as its asset-buying and credit-lending programs. Although it noticed in a statement that “The pick-up in Japan's economic activity has paused, mainly due to the effects of a slowdown in overseas economies and of the appreciation of the yen.” The target range for the benchmark interest rate, as it was expected, remains the same – 0%-0/1%. At the same time reports showed today that Japan’s exports fell for a second straight month and the nation’s trade deficit widened to 684.7 billion yen in November from a revised 280.2 billion yen in October. The yen strengthened slightly against the US counterpart on broad dollar depreciation – the pair dropped to 77.70 yen per dollar at the beginning of the European session.
