Currency Briefing - what you need to know for Wed April 18, 2012

Improved trader sentiment pushed the Singapore dollar to $1.2477 against the US dollar.

IG Markets Singapore said:

The Singapore dollar has gained against the greenback as strong US data improved trader sentiment for risk currencies.
The local currency rose to $1.2477 last night, again breaking through the $1.25 threshold against the US dollar.
Better-than-expected retail sales and a solid corporate earnings season has helped ease concerns the US economy was faltering.
However, Spain’s debt worries had been weighing heavy on traders who were retreating to safe havens as a result.
But a good take-up of Spanish debt has lifted sentiment in the global economy and seen inflows back into Asian currencies.

RBS meanwhile noted (for 17 April 2012 trading):

A better tone for risk-seeking sentiment helped the USD regain some ground versus the JPY, with USD/JPY trading up to just shy of 81 during the session.

AUD/USD and NZD/USD also moved higher with US equities finishing the session over 1% higher while the European G10 currencies mostly traded in tight ranges versus the USD.

The CAD benefited from a less dovish Bank of Canada statement, as officials said that it "may become appropriate" to remove some of the existing monetary policy stimulus.

Ahead is the Riksbank decision and we believe recent improvements in domestic data have reduced the chances of a Riksbank cut, which should prove a near term SEK positive given that the market is currently pricing in about a 50% chance of a cut. But, the weak economic outlook means further rate cuts remain likely this year, limiting EUR/SEK downside.

GFT, on the other hand, reported (for 17 April 2012 trading):

With most of the major currency pairs appreciating against the U.S. dollar and U.S. equities closing sharply higher, risk appetite has improved over the past 24 hours. Although the euro ended the day unchanged, the mere fact that it has stemmed its losses means that an intensification of the Eurozone sovereign debt crisis has been avoided for the time being.

A healthy Spanish bond auction and a surprise increase in the ZEW survey indicates that investors have not given up on Europe. The bid to cover ratio which measures demand was higher than a similar sale in late March. Yet it is important to realize that this is a sale of short term bills and not long term bonds. Investors are always more willing to hold short over longer term debt – the true test of investor confidence will be on Thursday when Spain auctions off its 2 and 10 year bonds.

For the time being, the EUR/USD continues to take its cue from Spanish bond yields and the steep decline below 6 percent kept the EUR/USD from retreating lower. Repatriation flows in fear of a liquidity squeeze has also kept the EUR/USD supported. The 1.30 level continues to hold in the EUR/USD and even though we believe this level will be taken out eventually, a further rise in Spanish bond yields would be needed for that to happen.