EUR/USD
Investors aren’t waiting for Standard & Poor’s or Moody’s Investors Service to strip France, Europe’s second-biggest economy, of its top credit rating. The extra yield demanded to lend to AAA rated France for 10 years was 163 basis points more than the German rate today in London. The gap was 200 basis points on Nov. 17, the widest since 1990, up from 28 in April. The French 10-year yield was at 3.53 percent, about midway between top-rated Holland and Belgium, which is graded one level lower at Aa1 by Moody’s. French borrowing costs are more than a percentage point above the AAA rated U.K. “France isn’t trading like an AAA,” said Bill Blain , a strategist at Newedge Group in London, who recommends buying U.K. government debt. “The market has made its judgment already.”The debt crisis that began more than two years ago in Greece and snared Ireland, Portugal, Italy and Spain is close to reaching France. Moody’s said in a report published yesterday that any persistent increase in borrowing costs would amplify the French government’s challenges as economic growth slows. President Nicolas Sarkozy has unveiled two sets of budget cuts since August to preserve the credit rating and try to calm jittery markets. Two-year yields on French debt have climbed 62 basis points since Aug. 31 to 1.73 percent, while the rate on German notes of similar maturity fell 34 points to 0.38 percent. “The market is concerned about the dissolution of the euro itself, hence only bunds are acting as a safe haven,” said Richard McGuire, a fixed-income strategist at Rabo Bank International in London. Germany is the region’s largest nation.
GBP/USD
Britain’s budget deficit narrowed in October as Chancellor of the Exchequer George Osborne slashed spending at government departments.Net borrowing excluding support for banks fell to 6.5 billion pounds ($10.2 billion) from 7.7 billion pounds a year earlier, the Office for National Statistics said in London today. The shortfall was in line with the median of 13 forecasts in a Bloomberg News survey. Outlays at government departments dropped 3.1 percent, limiting overall spending growth to 1.1 percent. Revenue rose 4.1 percent. Osborne and Prime Minister David Cameron have made all but eliminating a budget deficit of 9 percent of economic output by 2015 the centerpiece of their economic strategy, rebuffing opposition criticism that the cuts are hobbling growth. Only Greece, Ireland, Portugal and Iceland face a tighter fiscal squeeze among advanced economies, according to the International Monetary Fund.“It’s a tad better than expected,” said Ross Walker, chief U.K. economist at Royal Bank of Scotland Group Plc. “The markets are asking ‘is there a medium-term strategy and is it working?’ The answer to both is yes.” The pound was trading at $1.5649 as of 1 p.m. in London, little changed on the day. The yield on the benchmark 10-year government bond was down 3 basis points at 2.18 percent. It fell to 2.11 percent on Nov. 16, the lowest since at least 1992, when Bloomberg began collecting the data.
USD/JPY
The yen may rally through 70 per dollar next year as global financial stability in the second half damps investor appetite for the greenback, according to JPMorgan Chase & Co. Japan’s currency appreciated to 75.35 on Oct. 31, its highest level since World War II. The yen will strengthen further in the last six months of 2012 as the global economy stabilizes, driving investors to shun the dollar in favor of Japan’s currency, strategists led by Tohru Sasaki, head of Japan rates and foreign-exchange research at JPMorgan in Tokyo, wrote in a report today.“Risk sentiment will improve towards the second half of 2012 as the global economy recovers and the European fiscal problem moves towards a resolution,” Sasaki wrote. “We expect broad U.S. dollar weakness with an improvement in investors ‘sentiment. In this setting, dollar-yen is likely to trend lower, led by U.S. dollar weakness.” The currency pair will trade in a range in the first half of the year as a recession in Europe and sluggish growth elsewhere drive investors to buy the safest assets. The yen will reach 72 per dollar during the year and may appreciate through 70, Sasaki wrote. He couldn’t immediately be reached for comment when contacted by telephone. The yen dropped 0.1 percent to 76.96 per dollar at 1:40 New York time. It has appreciated 5.3 percent so far this year in the best performance against the greenback among the most-traded currencies tracked by Bloomberg.
USD/CAD
Canadian stocks rose for the first time in five days as gold shares surged after debt concerns in the U.S. and Europe spurred demand for the metal as a protection of wealth.Barrick Gold Corp., the largest producer of the precious metal, gained 2.2 percent. Royal Bank of Canada, the nation’s biggest lender, rose 1.1 percent after the Federal Reserve said it discussed monetary easing at its last meeting. Suncor Energy Inc., Canada’s biggest oil and gas producer, dropped 1.7 percent on concern slower growth will hurt fuel demand. The Standard & Poor’s/TSX Composite Index rose 10.47 points, or 0.1 percent, the most since Nov. 11, to 11,795.19. “I would call this a directionless market,” Todd Johnson, a money manager at BCV Asset Management in Winnipeg, Manitoba, said in a telephone interview. The firm oversees about C$300 million ($289.6 million). “There are just a lot of uncertainties and unknowns. The politicians in Washington have large difficulty ahead of them and the budget problems will be with us for awhile, while Europe continues to relatively do nothing while bond yields rise.” The S&P/TSX erased 3.6 percent from Nov. 15 through yesterday as the index had its longest streak of losses since June 8. The benchmark index of Canadian stocks has slipped 12 percent this year and is set to underperform the S&P 500 for the first year since 2003. The Standard & Poor’s 500 Index, the U.S. equity benchmark, has dropped 5.5 percent this year.
Investors aren’t waiting for Standard & Poor’s or Moody’s Investors Service to strip France, Europe’s second-biggest economy, of its top credit rating. The extra yield demanded to lend to AAA rated France for 10 years was 163 basis points more than the German rate today in London. The gap was 200 basis points on Nov. 17, the widest since 1990, up from 28 in April. The French 10-year yield was at 3.53 percent, about midway between top-rated Holland and Belgium, which is graded one level lower at Aa1 by Moody’s. French borrowing costs are more than a percentage point above the AAA rated U.K. “France isn’t trading like an AAA,” said Bill Blain , a strategist at Newedge Group in London, who recommends buying U.K. government debt. “The market has made its judgment already.”The debt crisis that began more than two years ago in Greece and snared Ireland, Portugal, Italy and Spain is close to reaching France. Moody’s said in a report published yesterday that any persistent increase in borrowing costs would amplify the French government’s challenges as economic growth slows. President Nicolas Sarkozy has unveiled two sets of budget cuts since August to preserve the credit rating and try to calm jittery markets. Two-year yields on French debt have climbed 62 basis points since Aug. 31 to 1.73 percent, while the rate on German notes of similar maturity fell 34 points to 0.38 percent. “The market is concerned about the dissolution of the euro itself, hence only bunds are acting as a safe haven,” said Richard McGuire, a fixed-income strategist at Rabo Bank International in London. Germany is the region’s largest nation.
GBP/USD
Britain’s budget deficit narrowed in October as Chancellor of the Exchequer George Osborne slashed spending at government departments.Net borrowing excluding support for banks fell to 6.5 billion pounds ($10.2 billion) from 7.7 billion pounds a year earlier, the Office for National Statistics said in London today. The shortfall was in line with the median of 13 forecasts in a Bloomberg News survey. Outlays at government departments dropped 3.1 percent, limiting overall spending growth to 1.1 percent. Revenue rose 4.1 percent. Osborne and Prime Minister David Cameron have made all but eliminating a budget deficit of 9 percent of economic output by 2015 the centerpiece of their economic strategy, rebuffing opposition criticism that the cuts are hobbling growth. Only Greece, Ireland, Portugal and Iceland face a tighter fiscal squeeze among advanced economies, according to the International Monetary Fund.“It’s a tad better than expected,” said Ross Walker, chief U.K. economist at Royal Bank of Scotland Group Plc. “The markets are asking ‘is there a medium-term strategy and is it working?’ The answer to both is yes.” The pound was trading at $1.5649 as of 1 p.m. in London, little changed on the day. The yield on the benchmark 10-year government bond was down 3 basis points at 2.18 percent. It fell to 2.11 percent on Nov. 16, the lowest since at least 1992, when Bloomberg began collecting the data.
USD/JPY
The yen may rally through 70 per dollar next year as global financial stability in the second half damps investor appetite for the greenback, according to JPMorgan Chase & Co. Japan’s currency appreciated to 75.35 on Oct. 31, its highest level since World War II. The yen will strengthen further in the last six months of 2012 as the global economy stabilizes, driving investors to shun the dollar in favor of Japan’s currency, strategists led by Tohru Sasaki, head of Japan rates and foreign-exchange research at JPMorgan in Tokyo, wrote in a report today.“Risk sentiment will improve towards the second half of 2012 as the global economy recovers and the European fiscal problem moves towards a resolution,” Sasaki wrote. “We expect broad U.S. dollar weakness with an improvement in investors ‘sentiment. In this setting, dollar-yen is likely to trend lower, led by U.S. dollar weakness.” The currency pair will trade in a range in the first half of the year as a recession in Europe and sluggish growth elsewhere drive investors to buy the safest assets. The yen will reach 72 per dollar during the year and may appreciate through 70, Sasaki wrote. He couldn’t immediately be reached for comment when contacted by telephone. The yen dropped 0.1 percent to 76.96 per dollar at 1:40 New York time. It has appreciated 5.3 percent so far this year in the best performance against the greenback among the most-traded currencies tracked by Bloomberg.
USD/CAD
Canadian stocks rose for the first time in five days as gold shares surged after debt concerns in the U.S. and Europe spurred demand for the metal as a protection of wealth.Barrick Gold Corp., the largest producer of the precious metal, gained 2.2 percent. Royal Bank of Canada, the nation’s biggest lender, rose 1.1 percent after the Federal Reserve said it discussed monetary easing at its last meeting. Suncor Energy Inc., Canada’s biggest oil and gas producer, dropped 1.7 percent on concern slower growth will hurt fuel demand. The Standard & Poor’s/TSX Composite Index rose 10.47 points, or 0.1 percent, the most since Nov. 11, to 11,795.19. “I would call this a directionless market,” Todd Johnson, a money manager at BCV Asset Management in Winnipeg, Manitoba, said in a telephone interview. The firm oversees about C$300 million ($289.6 million). “There are just a lot of uncertainties and unknowns. The politicians in Washington have large difficulty ahead of them and the budget problems will be with us for awhile, while Europe continues to relatively do nothing while bond yields rise.” The S&P/TSX erased 3.6 percent from Nov. 15 through yesterday as the index had its longest streak of losses since June 8. The benchmark index of Canadian stocks has slipped 12 percent this year and is set to underperform the S&P 500 for the first year since 2003. The Standard & Poor’s 500 Index, the U.S. equity benchmark, has dropped 5.5 percent this year.
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