Currencies: Dollar Unfazed by Flurry of U.S. Data

The dollar remained unfazed by yesterday's battery of news from the U.S., including the release of industrial production (definition | chart | source) data, the Federal Open Market Committee's decision to leave interest rates unchanged and the presidential election impasse in Florida.

Overnight, the dollar is slightly firmer but ranges are extremely narrow and trading activity very muted. After last night's close at $0.8575, the euro is now opening fractionally lower at $0.8560.

As expected, the European Central Bank left its interest rate unchanged at this morning's meeting. The minimum bid rate was kept at 4.75%, still well below the equivalent U.S. rate. "The ECB decision -- no one really cared," said Sonja Helleman of Dresdner Kleinwort Benson. (TheStreet.com wrote a separate story on the ECB meeting.)

The yen slipped badly yesterday, undermined by weak economic performance and by political confusion following the challenge to Prime Minister Yoshiro Mori from rivals in the ruling LDP party.

Today the currency has managed to hang steady at 108.90 as traders wait to see if the sensitive 109/dollar resistance level is broken. In the current market there may not be enough volume to drive the currency through this key level; the market may be content just to keep the yen in the current range. "Dollar/yen has traded higher but we've now hit resistance, and it may just go back towards 107," said Helleman.

With both the yen and the euro steady, the exchange rate between the two is also flat at 93.30.

Weaker economic data are tending to lead the pound lower. Yesterday, data showing increasing unemployment sent the currency falling. Today, flat retail sales numbers for October contributed to a sense that the economic outlook is softening. A Bank of England inflation report also stressed that price rises are benign and that economic growth is slowing to an annual rate of 2.5% from 3.0% so far this year.

Sterling remains under modest selling pressure at $1.4230, after last night's close at $1.4270. The euro is firmer vs. the pound at 60.15 pence.

The dollar continues to creep slowly higher vs. the Swiss franc and is opening higher at SF1.7840. The Swissy is also weaker vs. the euro at SF1.5280.

The Canadian dollar dropped through the key C$1.55 level yesterday and is opening this morning at C$1.5520.

The Australian dollar remains very weak. It has slipped again to $0.5195. The market is now focusing on the implications of yesterday's intervention by the Australian Reserve Bank. So far the impact has been minimal, but clearly further action is likely if the Australian dollar continues to lose ground -- as seems likely.

The New Zealand dollar is little changed at $0.3985.

Since the International Monetary Fund put together a financial bailout package for Argentina, some stability has returned to emerging markets currencies. Today the South African rand is steady at 7.67/dollar and the Polish zloty is firmer at 4.56/dollar, after hitting 4.57 yesterday.

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