By Omer Esiner of Travelex

The U.S. dollar slipped back toward the lower end of its recent ranges as improving appetite for riskier assets undermined some of the greenback's safe-haven allure overnight.

Friday's better than expected U.S. employment report was positive enough to improve investor risk appetite, but it was not strong enough to alter market expectations for very low U.S. lending rates for the foreseeable future. Moreover, the unclear impact of massive snowstorms on the data last month have kept many market participants from reading too heavily into last month's positive jobs report.

Moderating concerns about a debt default in Greece further assuaged sovereign credit worries while a generally credible deficit-slashing plan presented by Portugal reduced some of the market's fears about a spreading debt crisis in the eurozone.

Firmer commodities like crude oil, which hit an eight-week high over $82 a barrel overnight, added to the appeal of the dollar-bloc group of currencies from Australia, New Zealand and Canada.

With little in the way of economic data to trade off today, investors will continue to focus on fluctuations in risk appetite and market sentiment. Firmer stocks and commodities would boost demand for higher yields and likely see the greenback remain on the defensive.

USD: The U.S. dollar was stuck near the lower end of its recent ranges after rising to multimonth peaks against most of its major rivals earlier this month. The greenback has pared some of those impressive gains as concerns about a credit default in Greece have moderated, with the resulting improvement in risk appetite dulling some of the dollar's safe-haven appeal. Generally mixed U.S. data recently has also undermined some of the market's enthusiasm about an accelerating U.S. recovery and dampened expectations for near-term policy normalization by Fed.

While the dollar could suffer from additional losses over the near term, especially if Greek credit concerns continue to subside, its medium-term outlook remains reasonably upbeat. By all accounts, the U.S. economy appears to be outpacing most of its major rivals in recovery, which should ultimately prompt the Fed to begin normalizing policy before central banks abroad. Credit concerns in Europe may ease over the near term but will remain a very heavy drag on the 16-member bloc's economy and should delay any rate hike by the ECB. Finally, the greenback stands to benefit from a scenario in which global growth undershoots market expectations, and investors flock back to the relative safety of USD-denominated assets.

EUR: The euro remains well off a recent nine-month low against the U.S. dollar and a 15-month trough against the Canadian dollar, buoyed by a reduction in risk aversion associated with Greece's credit problems. Steps by Athens to shore up its public finances and a successful Greek bond auction helped assuage some worries and lifted the euro off of its lows. Today, Portugal announced an austerity plan that is forecast to shrink its budget deficit, currently at roughly 8.3% of GDP, to 2.8% by 2013. Lisbon's plan, which relies heavily on an outlook for its economy to recover further in the coming quarters, was mostly well received by financial markets. However, going forward, the euro is likely to revert back toward recent lows, given the still anemic pace of recovery and the outlook for the ECB to lag in policy normalization.

AUD: The Australian dollar rose to a six-week high against the greenback and near a one-week high against the Canadian dollar, broadly supported by the rebound in commodity prices and the improved sentiment throughout global markets. The Aussie, which had been stuck in a broad range over the past weeks, broke out to the upside overnight. The Aussie should remain well supported by its improving domestic economy, which should keep the Reserve Bank biased toward further tightening in the coming months.

CAD: Canadian housing starts rose by over 11,000 to 196,700 in February, above expectations for a rise to 190,000. The 6.1%(m/m) rise in housing starts last month highlighted the important role that a robust residential real estate market has played in Canada's overall recovery. The loonie rose to a new six-week high against the greenback following the news. The CAD had already been well bid due to the rise in crude oil prices to an eight-week high and the general rebound in investors' sentiment.
Omer Esiner serves as the Senior Currency Market Analyst at Travelex, Inc. a global financial institution specializing in corporate foreign exchange services and international payment solutions. In this capacity, he monitors, analyzes and interprets the economic, financial, political and technical factors that drive the movements of more than 100 currencies for Travelex. Mr. Esiner explains the currency markets' reaction to market events to clients, employees and members of the media.

You can view his daily reports, recording briefings, and quarterly reviews posted here. As an expert in foreign exchange, Mr. Esiner is quoted regularly by the financial media including The Wall Street Journal, CNN, Dow Jones Newswires, Reuters, the Nightly Business Report, National Public Radio, among others. Based in Washington, D.C., Esiner joined Travelex in February 2000. Prior to his current position, Esiner was a currency trader for several years. Mr. Esiner holds a bachelor's degree in economics from the University of Maryland, College Park. He is fluent in Turkish and proficient in Spanish.