Wednesday's Major Currency Analysis

The euro’s status as the best-performing currency in the past year is a sign that Europe is facing challenges similar to those of Japan, which had a so-called lost decade during the 1990s, according to Kit Juckes, a global strategist in London at Societe Generale SA. The euro is the top performer among the 10 developed-market currencies. "The current-account surplus is growing and growing, looking more Japanese by the day,” Juckes said in an interview on Bloomberg Radio’s “Surveillance” with Tom Keene and Michael McKee. “The inflation rate dipped a little lower, moving toward deflation, just like Japan, in our own quiet way."
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GBP/USD
The pound stayed the same for a fifth day as a report showed a gauge of U.K. construction based data on a survey of purchasing managers which increased for a fourth month in August, reaching the highest in almost six years. Sterling touched a three-month high versus the common currency before Bank of England policy makers meet this week. U.K. construction activity climbed to 59.1 last month from 57 in July, Markit Economics and the Chartered Institute of Purchasing and Supply said. The pound also rose as Verizon Communications Inc. agreed to buy Vodafone Group Plc (VOD)’s 45 % stake in Verizon Wireless for $130 billion. he U.K. 10-year gilt yields rose to the highest level in two years.
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USD/JPY
The Bank of Japan began a two-day policy meeting today. The central bank will probably refrain from adding to the unprecedented easing unveiled in April. Prime Minister Shinzo Abe will announce his decision on Oct. 2 on whether to raise the sales tax, Kyodo News reported today, citing an unidentified person in the government. Japanese shares could plunge 10% or more if the levy isn’t increased as planned. Japan is set to lift the 5% consumption tax to 8% in April 2014, and then to 10% in October 2015 in order to curb the world’s heaviest debt load.
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USD/CAD
Canada’s dollar rose on bets demand for oil will be buoyed by heightened tensions in the Middle East as U.S. President Barack Obama seeks support in Congress for a military strike on Syria. Canada’s 10-year government bonds fell, pushing yields up six basis points, or 0.06 percentage point, to 2.68 percent. Yields touched 2.72 percent, the highest level since Aug. 23. The price of the benchmark 1.5 percent debt due in June 2023 lost 52 cents to
C$89.97.
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