Mr. Randy Donney

The euro has some long-term neuroses that the market can't get rid of , said Randolph Donney , currency strategist at IFR Forexwatch in New York.The euro zone's struggle to agree on and implement structural reforms looms large among factors that could continue to undermine the euro , Mr. Donney said , and a potential victory Sunday by controversial Italian prime minister candidate Silvio Berlusconi is a near-term concern.Eclipsed by the excitement over the euro was a widely-expected 0.25 percentage-point cut from the Bank of England , which was preceded by weak U.K. industrial and manufacturing data for March.Another consecutive decline in the Nikkei stock index weighed on the yen , and coincided with waning euphoria about Japan's new government and planned reforms.Though implementing the reforms would require monetary easing , which would push the yen down further , signs are emerging of a new factor which may cap the dollar in the meantime.Japanese institutional investors are placing dollar-selling orders between 122 yen and 123 yen.Japanese life insurance companies and trust funds usually increase dollar-purchases at this time of year to buy dollar-denominated assets as part of new investments for the current fiscal year that started in April.

Randy Donney

Managing Analyst, +1 212 266 4850

Randy manages the IFR ForexWatch Market Intelligence Service and the IFR ForexWatch Petroleum Analytical Service.Randy's extensive fundamental and technical market expertise allows him to comment on a wide range of topics, including the global fixed-income markets, foreign exchange markets, and economic and political events.

Randy Donney

Managing Analyst, +1 212 266 4850

Randy manages the IFR ForexWatch Market Intelligence Service and the IFR ForexWatch Petroleum Analytical Service.

"The dollar had a pretty weak follow-through rally to start the day, and to not be able to gain on the 7.1% retail sales rise suggested there was no depth on the bid side," said Randolph Donney, currency strategist at IFR Forexwatch in New York.

While this surge in October retail sales went well past economists' expectations of a 2.5% rise, the bulk of the gain was due to heavy auto sales sparked by financing incentives.Excluding autos, retail sales rose 1% on the month.

...
Market participants also considered that the incentive-driven sales might be papering over a problem that would resurface later, Mr. Donney said, as "it was certainly not helpful to the bottom lines of companies paying [for the zero-financing incentives]."

Traders also took a closer look at the news from Afghanistan and the market reaction to Tuesday's news of the fall of Kabul.Even as late reports Wednesday said the Northern Alliance had seized strategic Taliban territory such as the city of Jalalabad and the Kandahar airport, the dollar made no moves higher against other currencies.

"We did get a little giddy with the [first] Northern Alliance victory," Mr. Donney said."The dollar was a tad overbought on a short-term basis," he said, giving traders an excuse to square positions Wednesday.

"The dollar is bouncing back, but everything is pretty much on hold until [U.S.] retail sales [data] on Friday," said Randy Donney, currency strategist at IFR Forexwatch in New York.For the near term, he expects the dollar to continue to push the euro down toward 89 cents and to move back up to 121.50 yen.

In late New York trading, the euro was at 89.95 cents, down from 90.55 cents earlier in London and below 90.65 cents late Friday in New York.The dollar was at 120.93 yen, stronger than 120.00 at the London open and 120.18 late Friday in New York.

The dollar was also at 1.6863 Swiss francs, up from 1.6741 Swiss francs in New York Friday, while sterling was at $1.4579, down from $1.4613.

With little economic data out of the U.S. in the first half of the week, traders are closely following U.S. equity markets for keys to near-term dollar direction.
...
"Unemployment is a lagging indicator, and [Friday's numbers] are probably going to be the biggest [adverse] shock we're going to see out of the U.S.," said Mr. Donney.

"The dollar is bouncing back, but everything is pretty much on hold until [U.S.] retail sales [data] on Friday," said Randy Donney, currency strategist at IFR Forexwatch in New York.For the near term, he expects the dollar to continue to push the euro down toward 89 cents and to move back up to 121.50 yen.

In late New York trading, the euro was at 89.95 cents, down from 90.55 cents earlier in London and below 90.65 cents late Friday in New York.The dollar was at 120.93 yen, stronger than 120.00 at the London open and 120.18 late Friday in New York.

The dollar was also at 1.6863 Swiss francs, up from 1.6741 Swiss francs in New York Friday, while sterling was at $1.4579, down from $1.4613.

With little economic data out of the U.S. in the first half of the week, traders are closely following U.S. equity markets for keys to near-term dollar direction.
...
"Unemployment is a lagging indicator, and [Friday's numbers] are probably going to be the biggest [adverse] shock we're going to see out of the U.S.," said Mr. Donney.

"The dollar had a pretty weak follow-through rally to start the day, and to not be able to gain on the 7.1% retail sales rise suggested there was no depth on the bid side," said Randolph Donney, currency strategist at IFR Forexwatch in New York.

While this surge in October retail sales went well past economists' expectations of a 2.5% rise, the bulk of the gain was due to heavy auto sales sparked by financing incentives.Excluding autos, retail sales rose 1% on the month.

...
Market participants also considered that the incentive-driven sales might be papering over a problem that would resurface later, Mr. Donney said, as "it was certainly not helpful to the bottom lines of companies paying [for the zero-financing incentives]."

Traders also took a closer look at the news from Afghanistan and the market reaction to Tuesday's news of the fall of Kabul.Even as late reports Wednesday said the Northern Alliance had seized strategic Taliban territory such as the city of Jalalabad and the Kandahar airport, the dollar made no moves higher against other currencies.

"We did get a little giddy with the [first] Northern Alliance victory," Mr. Donney said."The dollar was a tad overbought on a short-term basis," he said, giving traders an excuse to square positions Wednesday.