Dollar results were mixed on the day as the greenback gained on fundamental data but remained lower for the most part against the major currencies.
Against the euro, the dollar was lower at 1.3167 while declining against the British pound at 1.9639. The losses mounted for the second straight session even as early reports regarding <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />US consumer sentiment and manufacturing lifted the US dollar temporarily in New York. Comparatively, the greenback made gains against the Japanese yen as industrial production for the country was lower than expected. The notion helped the pair test just below the 119 figure at the New York open.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
Fundamental data was encouraging for the US dollar as both consumer confidence and manufacturing data in the Chicago area lent to speculation of stable interest rates in the US. The aforementioned alleviated some concerns of easing early on in 2007, pulling the Eurodollar future implied yield higher by 7 basis points in the overnight. For the month, consumer confidence soared above consensus readings, marking a 109 against estimates of 102 as higher stock market valuations have eased concerns of an imminent slowdown in the worlds largest economy. The monthly increase, the most since April, is likely to spur further retail spending in the holiday season heading into 2007. Additionally, manufacturing in the Chicago region rebounded from the lowest figure since 2003, rising to 52.4 in the month. The current report lends to some dollar support as the figure is suggestive of expansion, compared to the contractionary figures seen in the 49.9 figure last month. Both reports, in conjunction with the higher than expected existing home sales figures, are boosting speculation that Fed easing may be pushed back as stabilization seems to be taking place in the US economy.
Equity markets were encouraged by the news but pulled back mainly on yearend close outs and profit taking from yesterdays record close rally. Surging past the 12,500 mark for the first time, the Dow Jones industrial average dropped slightly on the day, still likely to close higher for the year by almost 17 percent. In midday trading, the benchmark blue chip index fell 20.03 points to 12, 490.54, down slightly from the 12,519.22 record close on Wednesday. Subsequently, the broader market was also lower as the S&P 500 index fell 3.26 points to 1,423.58. Coincidentally, oil prices helped in pushing sentiment lower as the weekly inventory report fell for the fifth straight week. The Department of Energy today revealed that US crude supplies dipped by 8 million barrels for the week, more than estimates had forecasted. As a result, the front month contract advanced by 17 cents to $60.51 on the New York Mercantile Exchange.
Bonds reacted to the news, following in sync with equity markets on the session. With Federal Reserve policy makers unlikely to ease rates anytime soon, the 10-year benchmark note moved lower, pushing the yield higher in midday trading. Subsequently, the notes yield rose 6 basis points from 4.65 percent to 4.71 percent.