Australia: The Australian dollar fell back through USD0.9900 overnight on renewed concern over European sovereign debt. Moody’s Investment Service warned of a possible downgrade in its rating of Spain’s government debt. This lead to a sell off in the higher yielding currencies, such as the AUD and NZD. Once again the AUD has failed to make much headway above the parity level, suggesting the local unit may struggle to break convincingly through this level again before the end of the year. Major players may now be considering avoiding taking large positions as we head towards Dec 31. Better than expected data releases out of the US overnight also helped to push the AUD/USD lower. Expect local exporter interest to help support the AUD today, with a relatively quiet session likely.

Majors: US yields are beginning to pick up a little following yesterday’s Federal Reserve statement on the US economic recovery and last night’s relatively positive data releases. The release of the US CPI figure was relatively benign, while regional manufacturing activity in New York rose strongly and US industrial production was also higher. The USD benefited from the higher yield spreads, gaining against most of its major counterparts. The USD strength against the EUR was further boosted by Moody’s warning on Spain’s debt rating. The EUR could remain vulnerable to further losses in the short term as concerns grow that Spain may also be forced to seek out a financial bailout. Markets will be closely monitoring this week’s European Union summit to see if there are any new announcements on measures they may take to try and bring the sovereign debt crisis under control.

More from IBT Markets:

Subscribe to get this delivered to your inbox daily

Follow us on Twitter.

Like us on Facebook.