Major Pairs: EUR/USD Advances, USD/JPY Extends Worst Performance

The euro advanced after purchasing-manager indexes showed manufacturing in the currency bloc unexpectedly expanded in July, bolstering demand for the region’s assets. The dollar climbed versus the yen for the first time in three days as U.S. Treasury yields increased, boosting the greenback’s allure. The euro slipped versus the American currency after data showed U.S. sales of new homes rose more than forecast last month. The European Central Bank meets Aug. 1. A gauge of volatility among Group-of-Seven currencies was up for the first time in 10 days.
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GBP/USD
The U.K. government struck a deal with the main retail banks to provide local detail of their lending to businesses. Seven lenders, which make up about 80 percent of company lending, will provide data on 10,000 postal codes, allowing the government to target where there are gaps, the Treasury in London said in an e-mailed statement today, Business Secretary Vince Cable used an interview in the Financial Times published today to criticize Bank of England policy makers, whom he labeled a “capital Taliban” for imposing burdens on banks that are limiting lending. They are “imposing restrictions which at this delicate stage of recovery actually make it more difficult for companies to operate and expand,” Cable said, according to the newspaper.
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USD/JPY
The yen will extend its world’s worst performance among major currencies this year as a reinforced Japanese government continues pumping cash into the economy, according to Axel Merk of Merk Investment LLC. Our price target for the yen is infinity, meaning we think the yen is going to be worthless down the road,” Merk, president and founder of the Mountain View, California-based company, The Japanese currency has weakened against all of its 31 most-traded counterparts this year, falling 13.4 percent against the U.S. dollar and 9.5 percent against the South Korean won, as Prime Minister Shinzo Abe, strengthened by an upper-house election victory on July 21, and Bank of Japan Governor Haruhiko Kuroda pushed to stem deflation. A weak currency tends to help exporters. Japan’s Nikkei-225 (NKY) Stock Average has increased 42 percent in 2013. The yen fell 0.8 percent to 100.19 per dollar.
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USD/CAD
Canada’s fell for the first time in five days as crude oil, the country’s largest export, fell along with commodities and equities as sentiment turned against riskier assets. Some of the real fast money had gotten short dollar/CAD and short on a couple of other axes too, and with equities selling off, with bonds selling off, with sovereigns in Europe selling off people just liquidated those short-term positions,” said Greg Anderson, head of global foreign-exchange strategy at Bank of Montreal. “We just put in the bottom in dollar/CAD and I’d be long dollars and short CAD here.” A short position is a bet that an asset will decline in value. the Canadian dollar fell 0.4 percent to C$1.0323 per U.S. dollar.
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