The dollar is losing ground against all of its major competitors at the start of the new trading week. The risk appetite of investors has increased Monday, after Spain has formally requested EU bank aid and the news that Greece has offered to buy back as much as 10 billion Euros of its debt. The unexpected decline in the November ISM manufacturing data has also contributed to the currency’s weakness.
Eurozone finance ministers will meet again in Brussels later today, to discuss details of the buyback of Greek bonds held by investors at a discounted rate. The buyback will be financed with 10 billion euros from the rescue package. It has to be concluded by December 13 for Greece to secure 30 billion euros of agreed bailout money.
German Chancellor Angela Merkel said that Germany may ultimately write-off Greek debt, but not before 2015. In an interview with German weekly Bild am Sonntag on Sunday, Merkel said “If Greece one day handles its revenues again without having to borrow, then we must take a look at the situation and assess it. That is not going to happen before 2014/2015 if everything goes according to plan.”
Moody’s Investors Service lowered the rating of Eurozone’s rescue fund, European Stability Mechanism to Aa1 from Aaa and maintained negative outlook. The latest move was driven by the downgrade of France, which remains the second largest contributor after Germany, to the financial resources of ESM.
The dollar traded around the $1.3000 level against the Euro for the bulk of Friday’s session, but has dropped to over a 1-month low of $1.3075 on Monday.
The downturn in the Eurozone manufacturing sector eased as estimated in November, final data from Markit Economics showed Monday. The final manufacturing Purchasing Managers’ Index rose to an eight-month month high of 46.2, in line with flash estimate. The reading was 45.4 in October.
The German manufacturing sector shrank as estimated earlier in November, but the rate of contraction eased from the previous month, final data from Markit Economics and BME showed Monday. The seasonally adjusted purchasing managers’ index (PMI) for the manufacturing sector increased to 46.8 in November from 46 in October, as recorded in the preliminary reports.
The French manufacturing sector operating conditions continued to deteriorate in November, final data from Markit Economics showed Monday. The headline Purchasing Managers’ Index for manufacturing rose to 44.5, from 43.7 in October. The reading was slightly below the flash estimate of 44.7.
U.K. banks drew down GBP 4.4 billion from the central bank’s Funding for Lending Scheme, first data on the use of the FLS published by the Bank of England showed Monday.
“Since the scheme was announced we have seen widespread falls in funding costs across different sources and an equally wide variety of lending rate reductions,” Paul Fisher, Executive Director for Markets at the Bank of England said.
The buck has been steadily declining against the pound sterling since reaching a high of $1.5988 on Friday, falling to a 1-month low of $1.6115 on Monday.
The British manufacturing sector downturn eased and moved closer to stabilization in November, a survey carried out by Markit Economics and the Chartered Institute of Purchasing and Supply (CIPS) showed Monday.
The seasonally adjusted Purchasing Manages’ Index (PMI) for the manufacturing sector rose to 49.1 in November from 47.3 in October. Economists were looking for a more modest rise to 48.
The Bank of Japan is committed to ease monetary policy aggressively, provided there is no significant risk to the sustainability of economic growth including the accumulation of financial imbalances, central bank governor Masaaki Shirakawa said Monday.
The greenback reached over a one-week high of Y82.738 against the Japanese Yen on Friday, but has fallen to around Y82.225 on Monday.
Following two months of modest expansion, activity in the U.S. manufacturing sector unexpectedly contracted in the month of November, according to a report released by the Institute for Supply Management on Monday.
The ISM said its purchasing managers’ index fell to 49.5 in November from 51.7 in October, with a reading below 50 indicating a contraction in manufacturing activity. The drop surprised economists, who had expected the index to come in unchanged compared to the previous month.
With spending on residential construction showing a notable increase, the Commerce Department released a report on Monday showing that total U.S. construction spending increased by much more than anticipated in the month of October.
The report said construction spending rose 1.4 percent to a seasonally adjusted annual rate of $872.1 billion in October from the revised September estimate of $860.4 billion. Economists had been expecting a much more modest increase of about 0.4 percent.