“The Australian dollar remained lower before a report forecast to show French consumer confidence fell amid concern disagreement among the euro region’s leaders is curbing prospects for growth.

Demand for the so-called Aussie and the New Zealand currency was limited after a senior ally of German Chancellor Angela Merkel said Spain’s Prime Minister Mariano Rajoy must stop prevaricating and decide whether the country needs a full rescue. The South Pacific nations’ currencies briefly gained after a leading indicator for China’s economy rose.

“Markets are still cautious,” said Alvin Pontoh, a Singapore-based strategist at TD Securities Inc. “Europe is still going to be the key event this week. If we see a not-so- favorable outcome from Spain, we could see the Aussie come down.”

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“The euro touched its lowest level in almost two weeks versus the yen as German consumer sentiment stagnated and Spanish borrowing costs rose at a bill auction amid concern the region’s debt crisis is deepening.

The 17-nation euro erased losses against the dollar before German Chancellor Angela Merkelmeets European Central Bank President Mario Draghi in Berlin today. Data showed German and French business confidence remained static as Italian sentiment stayed near a 15-year low. Australia’s dollar pared a decline as a leading indicator for China’s economy rose in August, supporting trade prospects.”

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“The euro declined for a fifth day against the yen after a gauge of German business confidence unexpectedly dropped in September, adding to concern the debt crisis is clouding the region’s economic outlook.

The 17-nation currency fell to the lowest in more than a week versus the dollar after German Chancellor Angela Merkel and French President Francois Hollande clashed over the weekend on a timetable to introduce joint oversight of euro-area banks. The yen strengthened versus all its major counterparts as Asian and European stocks slid, boosting demand for safer assets. The Australian dollar weakened on speculation growth in China, its biggest trading partner, is worsening.

“The data in the euro area is not good and the European Central Bank will need to keep policy loose, which will weigh on the currency,” said Raghav Subbarao, a foreign-exchange strategist at Barclays Plc in London. “The run-up in the euro looked overstretched and most people are turning more cautious at these levels.”

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“From the end of 2008 through July, no major currency appreciated as much as Australia’s dollar, thanks to booming shipments of iron ore and other commodities to China. Since then, it’s the worst performer as the engine of world growth slows.

The so-called Aussie depreciated 1.6 percent in the past month, the biggest decline among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. Traders are betting Australia’s central bank will cut interest rates to boost growth, dragging down the currency even though the Standard & Poor’s GSCI Index of commodities has risen about 18 percent from its low this year in June.

This reversal shows the dangers for an economy tied too closely to another. China, which buys 28 percent of Australia’s exports, said industrial output grew at the slowest pace in three years last month as Europe’s debt crisis cut sales of Chinese goods. Polls show Prime Minister Julia Gillard’s governingLabor Party is under pressure before elections due next year.”

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“Progress” in the euro debt crisis along with central bank co-ordination has the Aussie dollar off to the races overnight.

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Rumors or leaked information has a wonderful effect on assets….

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B.I. is calling it a 1996 moment. Which way will the greenback break ?

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“The euro dropped the most in two months against the dollar as an index of services and manufacturing in the region shrank to a three-year low.

The 17-nation currency declined for a third day versus the yen as the data added to evidence the debt crisis is sapping growth in the euro area. The yen and the dollar strengthened against most of their major counterparts after separate reports showed China’s manufacturing and Japanese exports declined, spurring demand for assets perceived as safer. Australia’s dollar and South Africa’s rand led losses among higher-yielding currencies.

“One of the big problems that remains unresolved in the euro area is a lack of growth,” said Lee Hardman, a foreign- exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “We still anticipate the euro will continue to weaken and expect a move back to $1.20 over the next six to 12 months.”

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“Gold is no longer a commodity trading in step with other commodities against the dollar, but is developing a life of its own as a currency in itself, say Deutsche Bank analysts Daniel Brebner and Xiao Fu.

Global uncertainty tends to have commodities moving in a risk-on, risk-off trading pattern, meaning good news generally sends commodities up and the dollar down, while bad news sends both asset classes in the reverse direction, with some exceptions.

That pattern is quickly becoming a thing of the past where gold is concerned, as the precious metal is becoming less correlated to other commodities and is behaving more like the safe-haven dollar and yen amid market swings.”

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“Japan lowered the assessment for its economy, the first consecutive downgrade since the waning of the global credit crunch in 2009, fueling concern the world’s third-largest economy will contract this quarter.

Japan’s “recovery appears to be pausing due to deceleration of the world economy,” the Cabinet Office said in a monthly report released in Tokyo today. “Private consumption is almost flat,” while industrial production and exports are weakening, it said.”

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The Aussie dollar took center stage as a risk on currency overnight as the fed pledged to sprinkle cocaine on the stock markets.

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“The Australian dollar traded 0.3 percent from the highest level in three weeks on speculation theFederal Reserve will signal further stimulus that tends to debase the U.S. currency.

The so-called Aussie and New Zealand’s dollar maintained two days of gains after Germany’s top constitutional court cleared the way yesterday for the nation’s ratification of the euro area’s permanent bailout fund. New Zealand’s currency, known as the kiwi, was close to a more-than four-month high after the Reserve Bank kept its benchmark interest rate unchanged today.

“The markets are seeing a good chance that the Fed will announce QE3 today,” Daisaku Ueno, a senior foreign-exchange and fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo, a unit of Japan’s biggest listed bank, said, referring to a third round of asset purchases known as quantitative easing. “That’s lending support to risk currencies like the Aussie and kiwi.”

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“The dollar weakened to a seven- month low against the yen and Treasuries rose amid speculation the Federal Reserve will unveil more stimulus today. European stocks dropped from a 14-month high as European Aeronautic, Defence & Space Co. and BAE Systems Plc fell on plans to merge.

The dollar depreciated 0.2 percent to 77.71 yen at 7:50 a.m. in New York. The yield on 10-year Treasuries fell two basis points. The yield spread between Dutch and German 10-year debt narrowed to the least since January after an election in the Netherlands. The Stoxx Europe 600 Index lost 0.3 percent as BAE dropped 6.8 percent and EADS sank 8.7 percent. Futures on the Standard & Poor’s 500 Index slipped 0.2 percent. Oil increased 0.2 percent to $97.24 a barrel.”

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Hints from China to German courts approving the ESM bailout have the Aussie rising.

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The euro is over 1.29 this morning as the German court has approved the ESM bailout with conditions….

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As a result of the vote the German bunds fell in overnight trade…

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“The euro rose to the highest in almost four months versus the dollar after Germany’s top constitutional court said it will proceed with a ruling on the country’s role in the European permanent bailout fund.

The dollar fell to the lowest in almost six weeks against the yen before the Federal Reservestarts a two-day meeting tomorrow amid speculation it will buy bonds to boost the economy in a third round of so-called quantitative easing. New Zealand’s dollar strengthened against all of its 16 major peers as Fitch Ratings affirmed the nation’s AA rating. The zloty led gains among emerging-market currencies versus the dollar after JPMorgan Chase & Co. raised its view on the Polish currency.”

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“The Australian and New Zealand dollars remained lower as demand weakened for commodity-related currencies on deepening concern that China’s growth is slowing.

The so-called Aussie held its biggest slide in a week after a private report showed business confidence declined in August, fanning speculation the Reserve Bank of Australia will resume interest-rate cuts to counter the impact of a global slowdown. Demand for the South Pacific nations’ currencies was supported by bets the Federal Reserve will announce a new round of asset purchases known as quantitative easing this week.

“The Aussie has been underperforming, which probably comes down to indications of softening around the edges of the Australian economy, as well as concern that the regional economy, notably China, is going to slow down,” said Todd Elmer, a currency strategist at Citigroup Inc. in Singapore. “The market has priced in a persistent risk of rate cuts” by the RBA.”

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“The Australian dollar retreated from a two-week high after unexpected declines in domestichome- loan approvals and China’s imports damped the outlook for economic growth.

The so-called Aussie also weakened for the first time in three days after data showed industrial output rose by the least in three years in China, Australia’s biggest trading partner. The New Zealand currency, nicknamed the kiwi, held onto a three- day gain on speculation the Federal Reserve will add stimulus as early as this week after a Sept. 7 report showed U.S. payrolls rose less than projected in August.”

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“The euro strengthened above $1.27 for the first time since June amid optimism a bond-purchase program announced by the European Central Bank will help contain the region’s debt crisis.

The 17-nation currency climbed to a two-month high versus the yen after German exports and industrial production for July beat economists’ forecasts. The dollar fell against most of its major counterparts before a U.S. monthly payroll report, after industry data yesterday showed American companies hired more workers last month than analysts predicted. The Swiss franc fell to the weakest since January against the euro.”

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