By Omer Esiner of TravelexThe dollar rebounded from the lower end of its recent ranges overnight as recent market moves toward riskier assets found little follow-through in generally quiet, eventless trade. The greenback had slipped against most of its major rivals in recent sessions as investors' appetite for riskier assets was revived, undermining some of the U.S. currency's safe-haven allure. Moderating worries about a Greek debt crisis improved market sentiment and lured investors back into commodities and emerging market assets. However, given the lack of impetus for further appreciation in risk assets, profit-taking prompted a sizable reversal of market moves since Friday. The pullback in crude oil from an eight-week high Monday undermined some of the recent allure of commodity currencies from Australia, New Zealand and Canada. Those currencies had stood out as some of the best performers in recent sessions. The pound suffered from a string of disappointing economic news and warnings from credit agencies about the clouded outlook for U.K. public finances and the health of the nation's banking sector. The yen firmed across the board, a move that was consistent with the general pullback in risk appetite overnight. Fiscal year-end capital repatriation also added to the yen's generally buoyant tone. With no big U.S. economic data on tap today, investors will continue to focus on moves in commodities, equities and the general health of investor risk appetite. USD: The dollar firmed off its recent lows overnight in generally uneventful, directionless trade. The greenback had come under selling pressure over recent sessions as improved risk appetite associated with moderating worries about a Greek debt crisis undermined some of the greenback's safe-haven allure. This lack of economic news so far this week has provided little follow-through to the move higher in risk appetite and prompted a bout of profit-taking, which supported the low-yielding dollar and yen overnight. While choppy trading over the near term remains likely, the greenback's medium-term outlook remains somewhat rosier than current price action suggests. Expectations for the U.S. to outpace most other major economies in recovery suggest that the Fed will ultimately lead in monetary policy normalization, an outlook that should see the greenback resume 2010's trend higher.
GBP: Mostly disappointing economic news overnight saw the pound give up much of its recent gains and revert back to its recent downward trend. The Royal Institute of Chartered Surveyors (RICS) housing survey slipped from a reading of 31.0 in January to 17.0 in February, the lowest reading of the index since August 2009. Separate data showed a jump in the U.K.'s trade gap to its widest level since August 2008. A steep (12.5% month over month) drop in U.K. exports pushed the deficit to 7.987 billion pounds in January, well above the 7.00 billion pound forecast. The news is particularly disappointing given the recent drop in the pound's value, a development that should normally generate increased demand for British exports. Fitch Ratings warned that the U.K.'s sovereign profile had deteriorated, calling for urgent fiscal adjustment. Moody's Investors Services said that its outlook for the U.K. government to begin removing extraordinary support for its banking sector had raised the risk that many financial institutions, who had not taken the needed steps to shore up their balance sheets, would be downgraded. Consequently, the pound should continue to have a difficult time sustaining strength going forward. CNY: Yi Gang, the head of China's State Administration for Foreign Exchange (SAFE), renewed his commitment to U.S. financial markets in a speech to media overnight. SAFE is branch of China's government that is responsible for the allocation of the nation's $2.4 trillion in foreign reserves, the largest in the world. China's continued commitment to U.S. assets, particularly agency and Treasury bonds, is needed to help fund America's massive deficits and support the value of the greenback. Amid an otherwise quiet session, the greenback found some marginal support from Mr. Gang's comments. AUD: The Australian dollar gave up some of its recent gains overnight, despite generally positive economic news. Investors pared exposure to higher-yielding and commodity currencies amid a pullback in risk appetite and profit-taking in otherwise quiet markets. A near 20% month-over-month increase in Internet job ads and a 13% month-over-month rise in newspaper job ads boosted the outlook for Thursday's broader jobs report, while a steep rise in business confidence added to the overall upbeat outlook for Australia's economy. While currently under pressure, the Aussie's downside should remain limited going forward.