It is the end of the quarter and the end to the first half of the year which
has been a brutal one for many fund managers. The Dow Jones Industrial Average
is down 14% since the beginning of the year and 7% since the beginning of the
quarter.
As for the US dollar, since January it has weakened against every major
currency except for the Canadian dollar. Its performance since April on the
other hand has been mixed. The dollar is virtually unchanged against the Euro,
down more than 5% against the Australian dollar and up more than 5% against the
Japanese Yen.
The worst performing currency this quarter has been the Japanese Yen, which
has fallen against every major G-10 currency.
Today, end of quarter profit taking has helped the US dollar recover the
majority of its earlier losses. At the open of the European Trading session, the
US dollar fell to fresh 25 year low against the Australian dollar. The market is
clearly expecting some hawkish comments from the Reserve Bank of Australia even
though rates will remain unchanged.
It is going to be a very active week for the currency market. The ECB
interest rate decision and the non-farm payrolls report collide to create the
perfect storm for the US dollar. What ECB President Trichet says about future
rate hikes should be more important than the non-farm payrolls report, unless of
course job losses are more than 100k.
