“The euro rose above $1.30 for the first time in a week as German investor sentiment improvedmore than economists predicted and amid speculation that Spain is moving toward asking for financial assistance.

Europe’s 17-nation currency strengthened for a fourth day versus the yen as the Financial Times reported that Spain has found an acceptable formula for seeking aid. The dollar and the yen fell against most of their major counterparts before U.S. reports that economists said will show improvement in industrial production and housing starts, damping demand for the safest assets. The pound fell against the euro as U.K. inflation slowed to the least in almost three years.

“We have a general risk-on mode” helping the euro to appreciate, said Daragh Maher, a currency strategist at HSBC Holdings Plc in London. “There’s also the local news with the suggestion that Spain was pretty much on the brink of asking for help. That has helped. It was a combination of the two that brought us above $1.30.””

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Australia’s dollar remained lower following a decline at the end of last week before the central bank releases minutes tomorrow of its October meeting, at which it cut interest rates for the first time in four months.

“The so-called Aussie was near a three-month low after Reserve Bank of Australia Governor Glenn Stevens said there is scope to further lower borrowing costs. New Zealand’s dollar, known as the kiwi, touched the weakest in a month after a private report showed the nation’s services industry contracted for the first time in almost three years.

“In the near term, I’m mildly bearish” on the Australian dollar, said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia (CBA), the nation’s biggest lender. “You do have an RBA governor that’s quite dovish.””
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“Australia’s dollar rose, trading 0.2 percent from its highest level in more than a week as gains in commodity prices boosted demand for the currency.

The so-called Aussie strengthened versus most of its 16 major counterparts this week after prices for iron ore, Australia’s top export, climbed to the most in more than two months. A report yesterday showed claims for jobless benefits in the U.S. fell to the least since February 2008, buoying risk appetite. Data today may show confidence in the world’s biggest economy stayed near the strongest level since May. New Zealand’s dollar, nicknamed the kiwi, rose as Asian stocks advanced.

“Iron ore prices have improved,” said Hans Kunnen, chief economist at St. George Bank Ltd. in Sydney. “The labor market may be picking up a touch in the U.S. It’s positive for the Aussie and it’s positive for risk.”

The Australian dollar added 0.1 percent to $1.0277 as of 4:49 p.m. in Sydney from $1.0264 yesterday, when it reached $1.0294, the highest since Oct. 2. It has climbed 0.9 percent this week. New Zealand’s currency strengthened 0.2 percent to 81.91 U.S. cents and is poised for a 0.2 percent weekly advance.”

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“The euro climbed for a second day against the dollar and yen amid speculation Spain is moving closer to requesting a sovereign bailout and unlocking European Central Bank bond purchases.

The 17-nation currency advanced with Spanish bonds, rebounding from yesterday’s one-week low versus the dollar, which was reached after Standard & Poor’s downgraded Spain two days ago. Japan’s currency slid before data that economists said will show U.S. consumer confidence was near the strongest since May. Singapore’s dollar appreciated after its monetary authority kept policy unchanged. A report showed euro-area industrial output climbed for a second month in August.”

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From slower global growth to EU banks probably needing to sell assets as the ECB may fall short had the euro in a continued tailspin.

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Europe met to discuss sovereign debt woes. They announced that the fund to aid stressed EU nations is fully operational and ready to used.

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“The world’s most-accurate foreign- exchange strategists say the dollar will strengthen even as the Federal Reserve debases it, unlike the previous two rounds of economic stimulus, when cash injections weakened the currency.

Fed Chairman Ben S. Bernanke’s $40 billion-a-month of bond purchases will leave a stronger currency in 2013, say nine of the 10 forecasters with the lowest margins of error in the six quarters ended Sept. 28 as measured by Bloomberg. Wells Fargo & Co. and Westpac Banking Corp., which tied for most-accurate, expect little damage from efforts to stimulate the economy and the so-called fiscal cliff of spending cuts and tax increases scheduled for next year.”

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“Gold fell for a second day in New York as some investors sold the metal after its rally to the highest in almost 11 months and as a stronger dollar curbed demand for an alternative investment.

The dollar climbed versus the euro as European finance ministers meet in Luxembourg today, while German Chancellor Angela Merkel visits Greece tomorrow for the first time since the crisis erupted. Gold futures reached $1,798.10 an ounce on Oct. 5, the highest since Nov. 9, before a report showed the U.S. unemployment rate fell to the lowest since January 2009.

“We’re seeing a stronger dollar which is translating into weaker gold,” Bernard Sin, head of currency and metal trading at bullion refiner MKS Finance SA in Geneva, said today by phone. “We’ve had a very good run-up. We’re seeing a bit of profit-taking.”

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“Australia’s dollar will rebound by year-end on demand for the world’s highest-yielding AAA assets even if the Reserve Bank cuts interest rates to a record, according to the currency’s most-accurate forecasters.

The so-called Aussie will climb to $1.05 by Dec. 31, from $1.0268 at 12:54 p.m. in Sydney, according to Credit Agricole CIB, which had the lowest margin of error for the past six quarters as tracked by Bloomberg Rankings. Second-rated National Australia Bank Ltd., which has the weakest end-2012 projections among the top five forecasters, sees the local dollar at parity by Dec. 31. The median prediction from 44 analysts surveyed by Bloomberg News is for $1.02.

“The attraction to the Aussie dollar as a reserve currency remains fairly strong,” said Mitul Kotecha, Hong Kong-based head of global foreign-exchange strategy at Credit Agricole. “Given that market expectations for rates are already pretty dovish, I don’t think we’re going to see too much more of a negative impact on the Aussie.”

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“The euro rose for a sixth day against the yen, the longest run of gains since March, on speculation European Central Bank President Mario Draghi will today provide more detail of the bond-purchase program announced last month.

The single currency gained versus all but two of its 16 major counterparts after the ECB kept its benchmark interest rate at a record-low 0.75 percent after a policy meeting today. The yen fell to a two-week low versus the dollar as the Bank of Japan started a two-day meeting. A measure of volatility among major currencies fell to the lowest level in almost five years.”

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Commodities in general sold off overnight as the dollar gained strength on expansion in the Chinese service sector.

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On the Greenback

The greenback has been weak since the late 80’s and recently so due to QE measures.

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“Australia’s central bank resumed cutting its benchmark interest rate to revive demand outside of a resource boom that may crest at a lower level than previously expected, sending the nation’s currency to a three-week low.

Governor Glenn Stevens and his board lowered the overnight cash-rate target by a quarter percentage point to 3.25 percent, the Reserve Bank of Australia said in a statement in Sydney today. The decision to end a three-meeting pause was predicted by nine of 28 economists surveyed by Bloomberg News, while the majority had forecast no change.”

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“The dollar has dropped 5 percent against a basket of six major currencies over the past two months amid expectations, and now the fact, of additional easing by the Federal Reserve.

The concern is that the third round of quantitative easing will ultimately spark inflation. This worry could well continue, driving the dollar down further.

Experts have several recommendations for investors to deal with such a trend, SmartMoney reports.”

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Asian markets and currencies enjoy a second day of gains on speculation China is close to providing stimulus. The Aussie and New Zealand dollars rose overnight to add to decent quarterly performance.

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Speculation of easing in China has put speculators into the risk on trade; including the Aussie dollar.

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The Euro traded lower overnight, but has since pared losses to go fractionally higher.

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“The Australian dollar fell to a two-week low and domestic bonds advanced as concern political clashes are hampering attempts to resolve Europe’s debt crisis sapped demand for riskier assets.

The so-called Aussie touched the weakest in almost three weeks against the yen after Artur Mas, the president of Catalonia, called early elections and said Spain’s richest region should seek “self-determination.” The country’s Prime Minister Mariano Rajoy is struggling to persuade his compatriots to accept the deepest austerity measures on record. New Zealand’s dollar declined after the nation posted a trade deficit that was bigger than economists estimated.”

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“The euro fell to a two-week low against the dollar after Spain’s central bank said gross domestic product kept dropping at a “significant pace” this quarter, stoking concern the region’s debt crisis is worsening.

The 17-nation currency weakened for a seventh day against the yen after the German, Dutch and Finnish governments said Europe’s rescue fund should assume a limited role in banking recapitalizations. The yen rose against all its major counterparts on speculation central banks around the world will struggle to revive growth, spurring demand for safer assets. Sweden’s krona declined after a report showed consumer confidence fell more than economists forecast.

“The markets are reacting to the negative news flow we’ve seen out of Spain, which destabilizes investor sentiment and pressures the euro,” said Jeremy Stretch, head of foreign- exchange strategy at Canadian Imperial Bank of Commerce in London. “The optimism we saw priced in to markets after action from central banks is waning.”

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“Talk of adopting the euro is thin on the ground before Lithuanian elections next month as politicians align with popular opposition to the switch.

The Baltic nation will abandon the litas “when the euro zone is ready,” Prime Minister Andrius Kubilius said Aug. 28, putting into question a 2014 target to follow Estonia into the currency. While Latvian officials retain plans to join the euro area that year, support among the population is at a record low.”

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