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Dollar Giving Back Some Gains After Congressional Statements


The dollar gained ground against its competitors in early trade Friday, as concerns over the fiscal cliff reduced the risk appetite of investors. The negotiations between President Obama and Congressional leaders began today, as they attempt to come to a solution on the impending fiscal cliff. Fears that the U.S. may fall back into recession if a deal is not reached to avoid the fiscal cliff have had a negative impact on investor sentiment.

A bipartisan group of Congressional leaders made statements this afternoon regarding the progress of the negotiations. Republicans announced that revenues are now on the table, as long as tax increases are accompanied by spending cuts. Perhaps even more importantly, the leaders announced that they are not going to wait until the last minute to come to a solution and will work through the Thanksgiving break.

The dollar climbed to a 3-day high of $1.2689 against the Euro on Friday, but has pulled back to around $1.2715 since the Congressional leaders made their statements.

International Monetary Fund Managing Director Christine Lagarde said the lender is committed to ensure that Greece economy return to a sustainable path. She will meet Eurozone leaders in Brussels on November 20 to forge a deal that would help Greece to get back on its feet.

The euro area current account surplus declined to EUR 0.8 billion in September from EUR 10.9 billion in August, the European Central Bank said Friday.

Eurozone trade surplus increased in September as the decline in imports exceeded the fall in exports, indicating that weak domestic demand was one of the factors behind the recent recession.

The trade surplus increased to EUR 9.8 billion in September from EUR 5.2 billion in August, data from Eurostat revealed Friday. The surplus was also bigger than a EUR 1.7 billion excess in September 2011. Economists had forecast a surplus of EUR 10 billion.

The greenback has also retreated from a high of $1.5835 against the pound sterling on Friday, to around $1.5865.

Confidence among British households about prices of their homes weakened at the most modest pace in twenty eight months in November, data from a survey by Markit Economics and Knight Frank showed Friday. The house price sentiment index increased to 47.6 in November from 45 in October, hitting the highest level since July 2010.

The Japanese government on Friday cut its assessment of the economy for a fourth month in a row, in the longest bout of downgrades since the global financial crisis after official data showed the gross domestic product contracted in the third quarter.

"The Japanese economy shows weakness recently due to deceleration of the world economy," the Cabinet Office said in its monthly report for November. This is a more downbeat assessment than in October when the government said "the economic recovery is in a weak tone" and "some components still show steady movements."

The Japanese government is readying another round of stimulus for the economy as instructed by Prime Minister Yoshihiko Noda, Finance Minister Koriki Jojima reportedly said Friday.

The buck has rebounded from an early low of Y80.883 against the Japanese Yen on Friday, to around Y81.350, near yesterday's high.

The U.S. manufacturing sector felt the impact of Superstorm Sandy last month, with industrial production hitting the skids after a modest rebound in September. Production fell 0.4 percent in October, according to figures released Friday morning by the Federal Reserve. The decline surprised economists, who had forecast a gain of 0.2 percent.

September production was also revised down to a 0.2 percent gain from the initial estimate of a 0.4 percent increase.

by RTTNews Staff Writer

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