The Dollar reversed directions in theNew York session as traders took profits from previous session moves, helping along major currency pairs. Against the euro, the dollar was slightly lower at 1.3128 while lower still against the British pound.
Trading at 1.9565, the sterlings gains on the day trumped momentum from four previously consecutive sessions of dollar gains. Subsequently, holiday volume continues to persist in the last week of 2006. Confirming the notion has been narrowing ranges with a bulk of the session coming in the form of a 30-40 pip fluctuation. The greenback was additionally lower against the Japanese yen and Canadian dollar in afternoon trading.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
On the economic front, MBA mortgage applications plummeted on the week, dropping by 14.2 percent as higher interest rates have lent to weakness in consumer interest. Notably, the benchmark 30-year fixed rate rose to 6.12 percent from a previous 6.10 percent last week as the shorter term 15-year rate also rose to 5.84 percent. The decrease in activity is mildly confirming of recent softness in the housing sector lending to some interim dollar weakness. With housing sector activity on a downtrend wealth effects and spending penchants are likely to pare back, negatively affecting an economy built on consumer demand. The resultant shockwaves are likely to be reflected in the consumer retail sales figures in months to come, in line with disappointing holiday retail figures this past week. Ultimately, the dour results will boost speculation of a near term rate cut by the Federal Reserve, lending some increased downward bias on the greenback.
Equity markets werent dampened by the news with further sentiment siding with a possible rate reduction early in the year. Thin volume and plenty of window dressing added to the momentum, supporting the benchmark markets higher in the <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />New York session. As a result, the Dow Jones industrial average was higher by 73.94 points to 12,481.57, just above the record close hit earlier this month. Subsequently, the broader market index was additionally higher as the S&P 500 index added 7.29 points to 1,424.19 heading into the afternoon close. With a second day advance in the works, a close at these levels would put US equity indexes higher for the year, breaching double digit territory. Notably, shares in Ford Motor advanced by 11 cents to $7.60 after speculation was fed of a potential alliance between the American car maker and Toyota. Shares of Toyota jumped $2.03 in afternoon trading, higher at $133.64.
Bonds were subsequently weaker as capital flows moved to higher risk equities leaving the 10-year benchmark moving higher. Weaker on the day, the yield on the note rose to 4.65 percent from 4.60 in afternoon trading.