Expert Analysis of Today's Market

Dollar Falls on Subprime Mortgage Market Trouble

Hans Nilsson 2007-03-12

The dollar fell against major currencies on Monday as trouble in the US subprime mortgage market was worsening reducing appetite for risky carry trades. Trading was quiet with no major US economic releases today. Investors are awaiting figures on Tuesday including Germany’s March ZEW indicator of economic sentiment and US February retail sales.

The EUR/USD rose within its narrowly defined trading range. We expect the pair to trade between the 1.31 support and the 1.33 resistance until the fundamental outlook changes.

image of 1 of EUR/USD

The USD/JPY pared overnight losses as investors sold riskier assets and stayed away from carry trades. The pair has rebounded about 3% after touching a 3-month low last week, recovering roughly 50% of the losses from the global sell-off. We expect yen volatility to continue and a test of the recent low is likely before a meaningful bottom is formed.

image 2 of USD/JPY

Financial and Economic News and Comments

US & Canada

New Century Financial Corp., the US second-biggest subprime lender, said it does not have the cash to pay creditors who are demanding their money now, increasing speculation that the company will go bankrupt.

Canadian labor productivity rose unexpectedly 0.3% in Q4, Statistics Canada said. Business output growth slowed to 0.3%. Growth in hours worked slowed to 0.1%.

FX Strategy Update

2008
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