Dollar Tumbles As Summers Withdrew From Fed Race, Syria Deal Sealed

The dollar gaps lower as the week starts on news that former Treasury Secretary Summers withdrew from the race to be the next Fed chairman. In addition, risk sentiments are boosted by news that Damascus pledged to commit to a US-Russian deal to eradicate its chemical weapons that averted the possibility of immediate military action against Bashar al-Assad's government. Dollar's weakness is seen broad based, with Aussie and Kiwi jumping most on rally in Asian equities. European majors closely followed. While the Japanese yen also gains against the greenback, risk appetite is limiting itself against other major currencies.

Former Treasury Secretary Lawrence Summers said in a letter over the weekend that he withdrew his name from consideration to be the next Fed chair after Bernanke steps down. He noted in the letter to President Obama that, "any possible confirmation process for me would be acrimonious and would not serve the interests of the Federal Reserve, the Administration, or ultimately, the interests of the nation's ongoing recovery". Summers was seen by economists as the less dovish candidate for Fed chair post, with current Fed vice Yellen and former Fed vice Kohn. Summers' withdrawal left Yellen as the front runner and it's believed that the dovish Yellen would likely keep Fed policies ultra ease longer to boost growth.

The plan to dismantle Syria's chemical weapons by mid-2014 was agreed after three days meeting between US secretary of stat Kerry and Russian foreign minister Lavrov. Syrian President al-Assad is given a week to hand over the details of the weapons and provide immediate access for inspection by US to be completed by November. The plan gained support from France and China, and most importantly, was reported to be agreed by Syria.

On the data front, New Zealand Westpac consumer confidence dropped to 115.4 in Q3. UK Rightmove house price dropped -1.5% mom in September. The eurozone will release August CPI revision today. The US will release Empire state manufacturing and industrial production. And, Canada will release international securities transactions.

Latest CFTC data showed sharp deterioration in yen positions on September 10 comparing to the prior week. And, the tide in Euro is possibly turning too. Euro longs dropped for the second consecutive week to 12.7k, comparing to the 2013 high at 40.1k made 2 weeks ago. Yen, net shorts rose sharply to -95.1k, from -79.8k, and is not far from 2013 low at -99.8k. Sterling net shorts dropped slightly to -38.2k, from -43.0k. The Canadian dollar net short was relatively steady at -30.9k. And, Aussie net shorts dropped to -60k, from -71.5k.