Daily Forex Round-Up: Greenback (USD) Little Changed against the Euro (EUR)

on Dec 13, 2012
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On 13 December 2012, Reuters reported that the dollar was little changed against the single currency, with investors still digesting the announcement of the US Federal Reserve to expand its asset purchase programme by buying $45 billion a month of Treasury securities to spur the economy. The yen slipped against most of its major peers amid speculation over further monetary easing and expectations that the Bank of Japan’s (BOJ) Tankan survey would show an increase in manufacturers’ pessimism.

**Dollar Flat versus Euro Day after Fed Announcement**
Reuters reports that the euro was little changed against the dollar on December 13, trading at $1.3080, having hit a session low of $1.3039 and a session high of $1.3100. On Wednesday, the Fed announced further monetary stimulus and kept interest rates at zero until unemployment fell to at least 6.5 percent. Reuters quotes analysts as saying that with the US central bank actively targeting economic data, the dollar could see a boost if data show any sign of improvement.

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The Financial Times reports that while the euro advanced after the Eurozone finance ministers agreed on steps to appoint a common banking supervisor, gains soon faded.
**Yen Slumps**
The yen fell across the board on December 13, slumping to its weakest level in almost nine months versus the dollar. Bloomberg reports that Japan’s currency dropped 0.2 percent to 83.46 per dollar at 8:02 a.m. EST after touching 83.67, a level unseen since March 21. The yen also lost ground against the euro, sliding 0.2 percent to 109.12 per euro after depreciating to 109.54, the weakest since April 4.

!m[Yen (JPY) Under Pressure With Election Approaching](/uploads/story/1030/thumbs/pic1_inline.png)Economists expect that the BOJ’s quarterly Tankan survey, scheduled to be released on December 14, will show that sentiment among large manufacturers slid in the fourth quarter. The Tankan survey expectations weighed on the yen, together with speculation that Shinzo Abe’s Liberal Democratic Party will win the general election. “The market is pricing in a poor Tankan, an Abe majority and further BOJ stimulus, which all point to a weaker yen,” noted Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd, as quoted by Bloomberg.

**Euro Gives up Gains against Swiss Franc (CHF)**
The Swiss franc, which this week has been in the forex spotlight, appreciated against the single currency following the decision of the Swiss National Bank (SNB) to leave its cap at 1.20 francs per euro unchanged. As reported by the FT, the euro fell 0.2 to 1.2091 francs.
“Following the large forex reserve accumulation due to record forex intervention to defend the floor in the second quarter of 2012, the SNB would not want the market to test the credibility of a higher floor against a gradually improving growth backdrop,” Credit Suisse (NYSE:CS) analysts noted, as quoted by the FT. The SNB however signalled that it was prepared to buy foreign currency in unlimited amounts to maintain the 1.20 floor.

Bloomberg quotes Peter Rosenstreich, chief foreign-exchange strategist at Swissquote Bank SA as saying that while there was speculation that the SNB would take further action to weaken the franc, ‘the classic saying ‘don’t believe the hype’ truly was in play.”
“We would watch for the pair to base around 1.2080 before heading lower to 1.2060,” added Mr Rosenstreich, as quoted by Bloomberg.

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