USD Trades Mixed Against Majors, Declines Against Euro

The U.S. dollar traded mixed against the majors but declined against the euro as Greece announced it will buy back government securities and will spend almost 10 billion euros doing so in a Dutch style auction. The dollar was also weighed down by an increase in risk appetite prompted by better than anticipated economic data out of China.

Risk appetite wasn’t affected after Moody’s announced the downgrade of the euro region’s Permanent Bailout Fund from AAA to AA1. The U.S. currency remained low after the Institute For Supply Management indicated that Manufacturing deteriorated last month, declining for the first time in three months. According to reports, ISM Manufacturing PMI dipped from 51.7 to 49.5. The Canadian dollar gained against its U.S. peer as sentiment improved after Greece announced the details of its debt buy-back plan. The loonie was also supported by higher crude oil prices.

In the euro region, the shared currency advanced versus the majority of its counterparts as Greek bonds led among those of the lower-rated countries, including Italy and Spain. The euro traded at a six-week high versus the greenback after Greece offered to pay close to 10 billion euros to buy back debt, a factor that set investors at ease and suggested the eurozone’s debt crisis isn’t taking a turn for the worse. The British pound, on the other hand, traded mixed and rose against the U.S. dollar after reports showed improvements in its Manufacturing Index.

And while market investors await the upcoming elections of December 16th, the Yen remained under pressure yet rallied versus the U.S. dollar. On Friday, opposition leader Shinzo Abe stated that he expects to become the new Prime Minister, and if so, he’ll pressure the Bank of Japan for more aggressive monetary easing. The yen benefitted from a hike in risk appetite brought on by reports which revealed that China’s HSBC Manufacturing PMI Index posted at 50.5 last month, indicating that it has once again entered into expansion territory.

Lastly, the Australian dollar fell to the weakest in over one week on speculation the Reserve Bank will lower the costs of borrowing money when it meets today. And the New Zealand dollar remained steady against the U.S. currency days after official reports confirmed that Germany’s Parliament approved a new bailout deal for Greece. The kiwi was buoyed by positive news out of China, its second largest partner in exports.

EUR/USD- Greece Will Buy Debt
The euro rallied against the U.S. dollar after Greece unveiled the details for buying back government securities, while positive data out of China improved overall investor sentiment. The euro pushed higher as it was reported that the region’s Finance Ministers would meet to discuss the terms of the Greek bailout package now that Germany has given the green light to forge ahead with the aid. On the data front, reports revealed that the E.U.’s Manufacturing PMI stayed at 46.2 last month, the highest level in 9 months although it remained in the contraction zone.

The release came in after China confirmed an increase from 49.5 to 50.5 in the nation’s Manufacturing PMI. Despite the positive sentiment in the market, investors remained concerned over negotiations between U.S. lawmakers regarding the spending cuts and tax hikes due to go into effect in just a few weeks.
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GBP/USD- U.K. Reports Lackluster PMI
The British pound gained against the U.S. dollar after reports indicated that manufacturing activity in the U.S. declined last month, while hopes for progress in the eurozone regarding the debt crisis improved risk appetite. In the U.K., official data indicated that the Manufacturing Purchasing Manager’s Index increased to a three-month high of 49.1 in November, surpassing expectations for a 48.1 reading. The figures showed that Manufacturing remained in contraction territory for a seventh consecutive month.
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USD/CHF- Greenback Weakens Versus Franc
The U.S. dollar traded at a one and a half month low versus the Swiss franc as sentiment improved in the market after China reported improvements in its Manufacturing sector, and Germany’s Parliament approved the new bailout package for Greece. On the data front, the SVME Purchasing Manager’s Association and Credit Suisse indicated that their Purchasing Manager’s Index climbed to a seasonally adjusted 48.5 last month, reaching a four month high, after it posted at 46.1 the prior month. Furthermore, data confirmed that Retail Sales increased by 2.7 percent in October which is less than the anticipated 4.1 rise.
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AUD/USD- Speculations On RBA
The Australian dollar extended losses against its U.S. counterpart as market investors continued to speculate on whether the Reserve Bank would reduce the interest rates when it issues its policy decision today. Analysts believe that the weak economic report on Retail Sales and the lackluster Corporate Earnings’ figures may prompt the country’s central bank to take such action and reduce the rate to 3.00%.

On the data front, a release from the Australian Bureau of Statistics confirmed that the Aussie Corporate Gross Operating Profits declined 2.9 percent in the months between July and September, after shrinking 0.3 percent in the previous quarter. Australian Retail Sales also disappointed as they posted at the same level as in October, after they rose 0.5 percent in September.
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Today’s Outlook
Today’s economic calendar shows that the U.K. will report on Construction PMI. The euro region will release figures on PPI. Canada will issue its Interest Rate Decision. And Australia will report on the GDP.