Daily FX Commentary, December 30, 2011

By Tim Harling, Jameson Bank

Expected range 1.0160 – 1.0250

On this, the final trading day of 2011, there are no data releases so markets look to be driven by month end rebalancing and year end flows mainly. The Euro has dropped below 100 yen for the first time since June of 2001. It is also poised for the first back to back annual drop since 2001 as debt concerns still weigh on the currency and investors seek out solace in the USD and JPY.

The Yuan has also risen to its highest level against the greenback since the dollar peg ended in 2005 at 6.3009, mainly due to a very positive yearend report from the Peoples Bank of China.

We are seeing some relative strength in the risk-on and commodity based currencies this morning as stock markets are closing on a positive note to end the year, although most equity indices and commodities are poised to end the year in the negative.

In today’s trivia question, name the only two countries in the world with a lower growth rate over the past decade than Italy (Europe’s third largest economy). Answer at the bottom of this commentary.

As an end note, it seems that the nations of Samoa and Tokelau have cracked Einstein’s theory of relativity and solved the conceptual problems of time travel. As the people of Samoa and Tokelau slept in their beds and the clock passed through midnight on Dec 29 it then entered into Jan 1. It was 119 years ago that their ancestors made a similar move in the opposite direction - not exactly light speed but quite the feat nonetheless. See the re-aligned time zone below.