The Dollar Gains As A Safe Haven On Speculation That U.S Banks Will Need More Funds

Daily Forex Fundamentals | Written by Finotec Group | May 06 09 09:49 GMT |

The dollar rose against the euro on concern U.S. regulators will say Bank of America Corp. needs $34 billion in new capital, boosting demand for the relative safety of the currencies. The euro fell the most in more than a week against the yen on concern the European Central Bank tomorrow will cut interest rates and buy debt to stem the slump. 'The reported amount of capital needed by Bank of America is very large, causing risk aversion,' said Masashi Kurabe, at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan's biggest publicly traded bank. 'As such, the yen and the dollar are being bought as 'safe-haven' currencies.' The Dollar Index, used by the ICE to track the greenback versus the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, increased to 84.221 today from 84.157 yesterday. The EUR/USD is currently trading at $1.3315 as of 9:15am, GMT. Sterling fell against the dollar on Monday, dented by caution ahead of a Bank of England policy meeting later this week, with trade thin and volatile due to London markets being closed for a public holiday. With Thursday's BoE meeting looming, analysts said many are wary of taking positions in sterling, while reports that UK Prime Minister Gordon Brown has come in for criticism from a senior Labour Party politician also weighed on sentiment. Traders and analysts said some European investors took advantage of thin trading conditions to push the UK currency lower, with low liquidity causing exaggerated movements on foreign exchange markets. The GBP/USD is currently trading at $1.5095 as of 9:30am, London Time. Canada's currency weakened for the first time in six days, dropping from the highest level since November, as stocks and crude oil declined. 'Despite a rekindling of optimism, the cyclical currencies should remain bound to the physical demand for commodities,' Yanick Desnoyers, Montreal-based assistant chief economist at National Bank Financial, a unit of Canada's sixth-largest bank, wrote in a note today. 'Hence a sustainable advance by the cyclical currencies is a more likely scenario for the second half of the year.' The USD/CAD is currently trading at 1.1750 as of 9:35am, London Time. Economic Calendar Time (GMT) E Event Currency Period Previous Previous Significance 22:45 Unemployment Rate NZD 4.7% 5.3% *** 20:00 BOC Governor Carney Speaks CAD *** 14:30 Crude Oil Inventories USD 4.1M ** 14:00 Ivey PMI CAD Apr 43.2 40.5 *** 12:30 Building Permits CAD Mar -15.9% 2.6% *** 12:15 ADP Non-farm Employment Change USD Apr -742K -644K *** 09:00 Retail Sales m/m EUR Mar -0.6% 0.1% ** 08:30 Services PMI GBP Apr 45.5 46.3 *** 01:30 Retail Sales m/m AUD -2.0% 0.5% *** 01:30 Trade Balance AUD 2.11B 1.75B *** Finotec Group Inc. http://www.finotec.com/ Disclaimer: FINOTEC Tradings Market Commentaries are provided for informational purposes only. The information contained within these reports is gathered from reputable news sources and not intended as investment advice. FINOTEC Trading assumes no responsibility or liability from gains or losses incurred by the information herein.