The dollar strengthened against the world's major global
currencies on Wednesday as investors remained camped out in the safe-haven
currency awaiting word of progress over the U.S. fiscal
cliff.
Investors were on edge due to uncertainty over the U.S. fiscal
cliff, a combination of expiring tax breaks and inbound spending cuts converging
at the same time after the end of this year. Earlier, Federal Reserve Chairman
Ben Bernanke urged the White House and Congress to find a way to steer the U.S.
economy away from the cliff, which fueled demand for the
dollar.
The euro continued to weaken on reaction to a Moody's decision to
downgrade France's sovereign ratings to Aa1 from Aaa. Meanwhile, in Europe,
eurozone policymakers opened a meeting to discuss Greece's finances, with a
EUR31.5 billion tranche of aid pending approval.
Eurozone finance ministers and senior International Monetary Fund
officials ended a nearly 12-hour meeting with no agreement on how to bring
Greece’s debt down to a sustainable level, and they failed to approve an overdue
tranche of bailout loan money for the country despite a looming threat of
bankruptcy. The failure to approve
immediate payment of a long-overdue E31.5 billion loan tranche to Greece came
despite official acknowledgement from Jean-Claude Juncker, who chairs the
Eurozone finance ministers’ group, that Greece had met all the conditions
demanded of it. The 17 Eurozone finance ministers, together with the heads of
the European Central Bank, International Monetary Fund and the EU’s Economic and
Monetary Affairs Commissioner, Olli Rehn, discussed a package of options to
reduce Greece’s national debt to 120% of GDP by 2020 – the benchmark for
sustainability upheld by the IMF.
Elsewhere in the U.S., housing starts rose 3.6% in October to a
seasonally adjusted annual rate of 894,000, the biggest gain in four years. The
number of building permits issued in October fell 2.7% to a seasonally adjusted
866,000. Both figures beat expectations.
In other news, the Bank of Japan met earlier and left benchmark
interest rates unchanged at 0.10%. The monetary authority also made no changes
to the country's JPY91 trillion asset purchasing plan, though the yen weakened
to a 7-month low against the greenback on Wednesday amid building market
sentiment that looser policies are on the way after December's
elections.
Japanese opposition leader Shinzo Abe may become the country's
next prime minister during Dec. 16 elections. Abe has said he favors more
aggressive monetary stimulus measures to jolt the Japanese
economy.
Later Wednesday, the U.S. will release weekly government reports
on initial jobless claims and crude oil inventories. In addition, the University of Michigan is to
release revised data on consumer sentiment and inflation expectations.
