The U.S. Dollar finished higher against a select few of currency markets in a trading session that was highlighted by volatility and trading surprises.  

The EUR USD managed to close higher after several intraday attempts to break it lower throughout the trading session.  From the opening the Euro traded lower on poor economic news but erased all losses following a supportive statement from European Central Bank President Trichet.  In a speech before the Euro Group, Trichet said it is “extremely important” that the U.S. supports a strong Dollar.  This statement was perceived as bullish for the Euro because many traders had gone into the report thinking Trichet would try to “talk down” the Euro.  

Without help from the ECB the Euro can continue higher as traders seem unwilling to react to negative news but instead are focused on the prospects of a recovery.

The GBP USD finished the day up sharply following rumors that the Bank of England may end its asset buyback program early.  The initial thrust to the upside this morning came following bullish comments from a Bank of England official.  He said the BoE asset buyback program was doing what it was expected to do.  This most likely led to the rumors.  Most of today’s activity may not have been Dollar related selling pressure versus the Pound but rather traders unwinding short British Pound spreads versus other currencies.  

The USD CAD posted a dramatic closing price reversal bottom.  Short investors were getting nervous about holding positions so close to parity and decided to take profits.  Some traders feared the Bank of Canada would step in to stop the rally in the Canadian Dollar following comments earlier this week from Prime Minister Harper.  He stated his concern that a high priced Canadian Dollar could have a detrimental effect on Canada’s ability to recover from the recession.  The surge above $76.00 in crude oil today helped limit losses.  Traders will be looking for a follow-through rally tomorrow to verify the start of a 2 to 3 counter-trend rally.

The USD JPY posed a strong gain today, boosted by comments from Japanese Finance Minister Fujii.  He triggered a strong break in the Yen when he restated his position about its value.  A couple of weeks ago Fujii said a higher Yen would be good for the economy.  Last night he retracted the comment and said he was against volatility in the currency markets and that currencies should be allowed to find value based on economic conditions.  He even denied making the statement.  This triggered the start of a rally which turned the main trend to up by the end of the day.

The AUD USD and NZD USD rallied on the possibility of interest rate hikes in Australia and New Zealand.  Traders are fairly certain that the Reserve Bank of Australia will raise rates in November based on hawkish comments from RBA chief Stephens.  Heavy speculation that the Reserve Bank of New Zealand will raise rates sooner than expected helped drive the New Zealand Dollar to a 15-month high.

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