Yen fresh buy signal

What's Behind the Gold Price Surge

After spending the summer in the doldrums, the price of gold has started to perk up in September -- enough to push the yellow metal near the $1,000-per-ounce mark. Last week, gold jumped 3.6% in just two days, peaking at $997.80 an ounce on Sept. 3. By the end of the week, it had pulled back slightly -- the December futures contract on the New York Mercantile Exchange settled $1.60 lower, at $996.10 on Sept. 4.

There's no shortage of rationales that investment strategists and economists have offered for the biggest price spike in gold in six months -- from increased purchases by China's central bank to inflation fears -- but these seem like mostly after-the-fact justifications for what's occurred, according to Philip Klapwijk, chairman of Britain-based metals consulting firm Gold Fields Minerals Service [GFMS].

U.S. dollar falls to 2009 low vs euro

The U.S. dollar sank to its lowest this year against the euro on Monday as a rosy global economic outlook fueled buying in stocks, helping lift gold above $1,000 an ounce and oil to more than $70 per barrel.

The U.S. currency, seen as a safe haven in times of uncertainty, tends to fall when investors' risk appetite increases.

Renewed concerns about the status of the dollar as the world's reserve currency sparked by a United Nations agency report on Monday and news out of China expressing concern about printing money to fund Treasury purchases have also weighed on the dollar. For the UN report, click on [ID:nL7696421]

"The dollar has been beaten down by several news headlines -- with the UN report and the China news," said Jacob Oubina, currency strategist, at Forex.com in Bedminster, New Jersey.

Market Wire Update: Day Of Divergence

n the afternoon U.S. session the markets saw Usd/Cad reverse course ahead of the other majors, and repay all of the pips stolen in the short-dollar rampage from earlier in the European session. The other commodity based mover, Aud/Usd has yet to reverse course, nor as yet have the European pairs.

Forex traders saw divergence in trade on Tuesday, between the pattern of no moves in Europe and mainly U.S. based breaks that we have seen in trade for over a month. Today bought only European based moves that did nothing more than just hang on in Wall Street trade. The second divergence was between equity percentage moves and the dollar. The trend has been for the major pairs to be lead by equity trade, something that has been in place for six months. Although one swallow does not make a summer, this is the first day in what seems like an eternity that the major pair moves have not been dominated by equity market trade.

Forex report: Dollar kicks around in the dust

Did demand for the dollar just suddenly drop to the wayside as the summer officially ended or did investors simultaneously desert the sinking ship? Either way, the dollar index, which tracks the greenback’s value versus a basket of currencies of its most commonly traded partners, fell right through its early August low point achieved when risk appetite was last served up to entice investors. Upgrades for several key U.S. companies and industries are lifting equity prices, provoking more recovery discussion and reminding investors on the near anniversary of the failure of Lehman Brothers Holdings that if the worst is past, then better times are surely ahead.

Click on link for updated table throughout the day at http://www.interactivebrokers.com/en/general/education/FX-View.php?ib_entity=llc

During the past couple of weeks, something has been brewing in the gold market as its price has moved ever-higher regardless of the direction of the dollar. Typically investors have bought gold for its safe haven qualities during times of uncertainty. The groundswell in optimism over the prospects for the price of gold have coincided with suspicions of better prospects for global industrial activity as predicted earlier by analysts at Goldman Sachs.

As the dollar slumped to $1.45 versus the euro currency today, it was becoming apparent that metals prices around the world were starting to rise and included gains for copper, lead, nickel as well as the price of crude oil. The house of JPMorgan also lifted the prospects for shares at industrial conglomerate, General Electric whose share price has surged 5% this morning. In both cases (industrial activity and prospects for GE) investors have clearly returned to work today with a clean slate and are prepared to take a fresh look at the world’s economic prospects for 2009 and into next year. The pessimism marked by weakness in Asian markets over recent days has clearly been tossed into the trash can.

The one piece of the jigsaw that is missing today is the typical rise in bond yields. The 10-year U.S. note yield at 3.4% is hardly any distance from last Monday’s 3.3% when stocks slid 2% to begin a week of worries about the economy. Although there is no need to raise interest rates especially given an ongoing rise in the rate of unemployment, the step up in risk appetite usually detracts from funds flow to the bond markets and acts to sober-up a yield curve that’s become too flat-footed. With notes unchanged today, fixed-income investors are not taking much notice of the rally for stocks.

Today, earnings are back in focus, economic activity is back in focus and risk aversion has been assigned to a seat in the stands after gracefully bowing off the field. Investors seem to no longer need the sanctity of the dollar a year on from the failure of Lehman Brothers.

British industrial and manufacturing activity both rose during July serving to increase optimism in a recently beaten down British pound. It rose to $1.6555 today despite less rosy news from the British Retailers Consortium who said that retail sales fell on a quarterly basis on the back of ongoing subdued signs from consumers.

In Germany the industrial data was actually worse than expected. Investors keen to see a resurgence of industrial output in July of as much as 1.6% were disappointed by a 0.9% decline. Still, the overall negative tone to the dollar allowed for the euro to rally and lifted it to ¥133.79 against the Japanese yen.

The dollar also fell against the yen to ¥92.19. An industry group noted that August bankruptcies in Japan declined for the first time in three months, possibly boosting the outlook for the Japanese recovery. During the last week the rate charged by cash lenders to borrowers of short-dated loans fell to the lowest among the G7 nations. The three-month U.S. dollar Libor interbank borrowing rate fell to 0.3% undercutting the rate on the Swiss franc for the first time since last November.

Both Australian and Canadian dollars were off to the races this morning. The Aussie dollar was most obviously in the saddle perhaps given its yield advantage and arguably the greater likelihood that its central bank would not hesitate to raise short-term interest rates before other nations do. The Aussie unit rose to 86.54 U.S. cents this morning. It benefits from rising raw material prices and increasing optimism for industrial activity. The Canadian dollar also rose to buy 93.22 U.S. cents on the back of increased demand for base metals and crude oil.

There are still question-marks over economic prospects ahead. Most notably is what independent lead consumers might take to shape the recovery. So far it’s been the indirect actions from governments’ stimulus that has prodded consumption to respond. At some point, this weaning process needs to come to an end.

Daily Forex Report - USD extends losses as risk sentiment improves

• USD: Lower, UN calls for replacement of USD with a new global currency, risk sentiment improves
• JPY: Higher, Japanese government sees economy improving, rising unemployment clouds the outlook
• EUR: Higher, Trichet says economic indicators have been better than expected, global economy stabilizing
• GBP: Higher, industrial output rises above forecast, FTSE rallies to 11 month high
• CAD and AUD: AUD & CAD higher, Australia's business confidence rises, gold and crude prices surge

Overview
USD traded sharply lower Tuesday with the dollar index trading at its lowest level since September 2008. The USD was pressured by a confluence of factors which included a UN report calling for the replacement of the USD with a new global currency to protect emerging markets, improving risk sentiment as equity markets rallied to the year's high in Asia and emerging equity markets trade above pre-Leman highs and positive economic data from Australia, the UK and Germany. Australia's business confidence rose to a six-year high. UK manufacturing output rose more than three times than expected and German exports posted a strong rise in July. The USD was also pressured by a surge in crude prices and the price of gold trading above $1000 an ounce. The G-20 pledge to continue to support the financial markets and maintain expansionary monetary and fiscal policies until recovery is secured adds to today's USD sell off and commodity price rise. Economist Roubini says the USD will weaken and is at risk of a crash if deficits are not controlled and reduced. The trade looked beyond mixed economic data from Japan and Switzerland with Japan's service sector index falling in August and Swiss unemployment rising to a six-year high. Diversification out of USD will likely continue until the G-20 signal an exit strategy from fiscal and monetary policy stimulus and the US addresses it's fiscal outlook.

Today's US data:
Consumer credit will be released after this report is published expected at -4 bln.

Upcoming US data:
On September 10th initial jobless claims for week ending 09/05 will be released expected at 960k compared to 970k last month along with July trade balance expected at -27.5 bln compared to -27.1 bln last month. On September 11th August import prices will be released expected at 0.9% compared to -0.7% last month along with preliminary University of Michigan consumer sentiment expected 65.3 compared to 65.7 last month. July wholesale inventories and the Treasury budget for August will be released on September 11th as well. Wholesale inventories are expected to fall by 1% compared to -1.7 last month the Treasury budget is expected to -161.50 bln compared to -111.9 1bln last month.

Dollar, Euro Fall Vs Yen As Japan Exporters Sell

The dollar and euro fell against the yen in Asia Tuesday on selling by Japanese exporters to settle their accounts, with trading direction for the rest of the day likely to depend on stock movements, dealers said.

"A lack of major economic data makes it very hard to predict the direction, players have no options right now but to focus on stock moves for trading cue," said Hiroshi Maeba, a senior dealer at Nomura Securities.

As of 0450 GMT, the dollar stood at Y92.72 from Y92.97 in London Monday, while the euro was at Y132.90 from Y133.54. The New York market was closed Monday for a holiday. Although the overall volume of trade in Asia was thin, some Japanese exporters and short-term hedge funds sold dollars and euros, dealers noted.

At 0530 GMT, Japan's benchmark Nikkei 225 Stock Average stood up 0.5% at 10375.31, while China's Shanghai Composite Index was up 0.70% at 2902.13. Share price rises usually push the greenback and euro higher due to increased risk appetite, while the safe-haven yen often benefits from weak equity prices.

For the rest of the week, share price moves will likely remain as a major trading factor in the currency market, said Shinkin Central Bank's Shinichi Hayashi. In particular, market participants are focused on how Chinese economic data, to be released Friday, will affect Chinese share prices.

"China's economic data and share prices are one of the keys to global economic improvement," he said.

Among the data Friday is China's industrial output. Economists surveyed by Dow Jones Newswires forecast on average that output may increase by 12.0% in August from a year earlier, faster than July's 10.8% increase.

If results are weaker than expected and spur a fall in Chinese stock prices, the dollar may target Y90 and the euro may fall below Y130.00, some dealers said. On the other hand, if results are positive, currency market reaction will likely be limited because players have already factored in such outcomes, dealers noted.

The dollar index, which measures the currency's value against six major units, stood at 77.97 from 78.02 late Monday in London.

Interbank Foreign Exchange Rates At 00:50 EDT / 0450 GMT
                        Latest     Previous   %Chg   Daily   Daily    %Chg
Dollar Rates                        2150 GMT          High    Low      12/31
USD/JPY Yen              92.70-72   93.04-08   -0.37  93.08   92.69    +2.32
EUR/USD Euro             1.4332-37  1.4332-36   0.00  1.4346  1.4329   +2.53
GBP/USD Sterling         1.6341-45  1.6345-49  -0.02  1.6363  1.6324  +11.73
USD/CHF Swiss Franc      1.0593-98  1.0595-00  -0.02  1.0602  1.0590   -0.71
USD/CAD Canadian Dlr     1.0784-89  1.0773-78  +0.10  1.0796  1.0774  -11.35
AUD/USD Australian Dlr   0.8545-47  0.8554-58  -0.11  0.8560  0.8529  +20.81
NZD/USD New Zealand Dlr  0.6909-15  0.6926-30  -0.25  0.6929  0.6909  +18.41
EUR/JPY Yen              132.89-94  133.35-40  -0.34  133.47  132.88   +4.94

Rupee rises by 4 paise to 48.61 a dollar

The Indian rupee strengthened marginally by 4 paise against the US dollar in the opening trade on expectations of more capital inflows by foreign funds as stock market may open in positive zone in line with other Asian bourses.

Weak dollar against some other Asian currencies also supported the Indian rupee.

At the Interbank Foreign Exchange (Forex) market, the domestic unit gained another 4 paise to quote at 48.61 a dollar over the previous close. Yesterday, the rupee closed 23 paise higher at 48.65/66 after the BSE Sensex surged over 325 points.

Forex dealers said anticipation of increased capital inflows by funds into equity markets, tracking firming trend on the other Asian bourses, which were up by almost 0.80 per cent in the morning trade, and weaker dollar against other Asian currencies mainly supported the Indian currency.

Rupee rises by 18 paise to end at 4-week high

The rupee on Tuesday gained 18 paise against the US currency to close at a four-week high of 48.47/48 as firming equity markets and weak

dollar overseas powered the domestic currency to extend its rising streak for the fifth straight session.
At the Interbank Foreign Exchange (Forex) market, the domestic unit resumed better at 48.61/62 a dollar from its overnight close of 48.65/66 per dollar.

It moved in a range of 48.67 to 48.47 before ending the day at 48.47/48 a dollar, the level not seen since August 14. The rupee gained 56 paisa or 1.14% in five-day gaining streak.

Dealers attributed the persistent rise in equity markets to the rupee rally.

The Sensex rose by 107.35 points or 0.67% on Tuesday after garnering about 618 points or 4.01% in last two trading days.

Firm Asian as well as European stock markets also partly boosted the rupee sentiment, they added.

Foreign Institutional Investors (FIIs) pumped in over Rs 1,000 crore on September 7, as per SEBI figures.

The greenback was trading multi-months low against its major rivals on Tuesday, compelling dealers to sell dollar which also assisted the rupee rise.

FOREX-Dollar near 1-year low as stocks, commodities rise

Investors in risk-seeking mode as global stocks rise

* Talk of diversification into gold keeps dlr on back foot

* Euro breaks above $1.45, highest since December (Adds comments, details. Updates prices)

By Vivianne Rodrigues

NEW YORK, Sept 8 (Reuters) - The U.S. dollar fell to its lowest in almost a year on Tuesday after gains in global stocks fed into renewed risk appetite as trading volume picked up at the end of summer holidays in the United States.

Some analysts said the U.S. dollar may resume seasonal declines as volume increases after a brief period in which the greenback rose following upbeat economic indicators.

A rally in gold prices above $1,000 and concerns over the dollar's long-term status as the world's reserve currency, sparked by a United Nations report on Monday, also undermined demand for the greenback. [ID:nL7696421].

The dollar slumped to its lowest in almost a year against a basket of major currencies while the euro broke above a key options barrier at $1.4450 EUR=, traders noted.

The U.S. currency, seen as a safe-haven in times of uncertainty, tends to fall when risk appetite increases.

"As we enter the first trading day after the summer, investors are decisively in risk-seeking mode," said Camilla Sutton, a currency strategist at Scotia Capital in Toronto. "Equities are strong, commodities have jumped higher and the dollar is noticeably weak."

The dollar index, which measures the value of the greenback against a basket of six major currencies, earlier fell over one percent on the day to 77.04 .DXY, its lowest in almost a year.

The euro rose as high as $1.4530, according to Reuters data, its strongest since December. It was last up 1.1 percent at $1.4491.

Over the past 20 years, September has been the second weakest month of the year for the dollar against the euro on an average and median basis, with the December being the weakest, according to data compiled by RBS Global Banking and Markets.

"Today's price action may likely be the beginning of the next leg lower on the dollar," said Scotia Capital's Sutton. "It all started when gold led the move higher in commodities, and as it broke the key $1,000 level it helped push the dollar even lower."

Gold jumped more than 1 percent earlier to $1,007.45 an ounce XAU=, its highest since March 2008. Crude prices also rose sharply on the New York Mercantile Exchange and traded above $70 a barrel .

Euro Sharply Higher, But Pulls Back From Peak

The euro remains sharply higher against the dollar Tuesday but failed to extend its brief spike above $1.45 in early New York trading.

The euro had broken above $1.4500 to reach $1.4507, its highest level since Dec. 18, before retreating slightly.

With the single currency having smashed through the summer's ranges, its next important ceiling is $1.4720, the high it also reached in December last year, said analysts. In the short run, the euro is seen in a range between $1.4450 and $1.4600.

The dollar's decline, which began overnight in Asia and Europe, is broad and extensive. The greenback is down against higher-yielding and commodity-based based currencies across the globe. The dollar index, a measure of the greenback's performance against a basket of six currencies, fell to a new 2009 low of 77.14, a level last seen in September 2008. The dollar index is now at 77.25.

The dollar had been in its previous ranges "for a very long time, and it's been waiting for a catalyst to sort of break it out of its paralysis," said Jessica Hoversen, fixed income and foreign exchange analyst at MF Global in Chicago

Those catalysts included a weekend G20 meeting during which finance ministers said they would maintain fiscal stimulus measures, higher oil prices and improving economic data from the euro zone and Australia.

U.S. stocks, which risk-sensitive currencies have tracked in recent months, opened higher, but did not appear to give further support to the euro and other high-yielding currencies.

Gold is putting pressure on the dollar. The precious metal is trading above $1,000 an ounce Tuesday for the first time since February. Strength in Asian and European stock bourses helped prompt buying in gold, said Larry Young, senior trader with Infinity Futures.

"It appears it was the beginning of some important asset shift changes, which are now also weighing on the dollar," said Scotia analysts.

Investors could be buying gold as a hedge against deflation or inflation, said Andrew Wilkinson, senior market analyst at Interactive Brokers in Connecticut.

"This is an important development as it leaves the major dollar downtrend intact and highlights that sentiment remains dollar bearish," said analysts at Scotia Capital in Toronto.

Even the safe-haven Swiss franc is putting pressure on the greenback. The dollar fell to its lowest levels against the franc since December.

Early Tuesday in New York, the euro was at $1.4477 from $1.4301 late Friday, according to EBS via CQG. The dollar was at Y92.23 from Y93.03. The euro was at Y133.50 from Y133.06. The U.K. pound was at $1.6535 from $1.6400, and the dollar was at CHF 1.0472 from CHF1.0606.

Investors seem to be increasingly convinced of a global economic recovery as good overnight data on German exports, and the state of the Australian economy, is fueling risk appetite, leading investors to flow into the euro.

"The euro has been on the rampage overnight," said Neil Mellor of the Bank of New York Mellon.

Investors appeared to be still taking their cue into higher-yielding currencies from G20 assurance over the weekend that there is no hurry to bring an end to the extraordinarily easy monetary policy in most major economies.

Weighing on the dollar are comments in the United Nations' annual trade and development report, which urges the creation of a new world reserve system using several currencies, as opposed to just the dollar.

" We do not think the UN will prove the most important voice in the reserve currency debate, but do think that it adds yet another voice and one that is decidedly against the dollar," Scotia analysts said.