Aussie dollar – On the eve of what could be the sixth straight employment gain by Australian employers the domestic currency has rebounded from Tuesday’s selling pressure and has poked its head higher than Monday’s ceiling at 91.18 U.S. cents. Such optimism suggests that dealers are willing to argue against the prediction that the European financial crisis is about to take a turn for the worse. At the very least Aussie dollar buying suggests that the fallout from the Eurozone might be limited given any of the measures previously put into action by central bankers. There was also positive domestic data in the news as a report showed a 1.7% rise in the volume of home loans extended throughout July. A decline for June was also softened. The report indicates the ongoing health of the consumer and is supportive of a claim that the RBA should continue to reign in monetary policy. The central bank left policy on hold earlier this week noting that the implication of overseas events continues to restrain their activity.

Euro – The euro traded to its lowest point for September so far earlier when it reached $1.2659. Comments from ECB member Axel Weber warned against complacency when he said that it’s too soon to call an end to the crisis although he discounted a deflationary spiral adding that there would be no return to recession. The euro has since perked up and rose to $1.2720 before heading back below $1.2700. The single currency is also lower against the British pound where it buys 82.16 pence but has made a minor gain against the yen at ¥106.43.

Japanese yen – The yen is back to a near unchanged price of ¥83.80 per dollar after Japanese Finance Minister Noda once again sounded prepared to wheel out the currency cannons. Mr. Noda said that he was prepared to take bold action against the persistent strength of the yen, which must have created some ripples in Tokyo as the unit snapped back from a gain to as high as ¥83.62.

British pound – Something appears odd about the spike in the British pound today. The data released showing manufacturing output and industrial production grew were hardly out of kilter with what was expected. What was out of line was the unexpected monthly gain for home prices reported by the Halifax Building Society, when investors were expecting a loss. That would have kept the story in line with what the Nationwide reported last week. Bears have been pounding the currency lower recently for fear that a recovery fast appearing to lose steam would crash headlong into spending cuts coming into play as a result of an austere British budget. The pound came very close to hitting $1.5500 having recovered from its lowest intraday point at $1.5297 on Tuesday. The movement suggests plenty of short-covering going on. Elsewhere mobile operator Vodaphone disposed of a $6.6 billion stake in China Mobile, which may have sparked a one-off sterling purchase at a point when the market was already short.     

U.S. Dollar – The Fed releases its Beige Book later this afternoon and will provide its latest snapshot of health across the Fed’s 12 districts. Heading into the report the market seems braced for signs of a slowdown despite the unexpectedly positive surprise last week. Employers created 71,000 new positions during August and almost twice the expected pace. This morning the dollar is weaker against a basket of its major trading partners at 82.75. Investors appear undecided either way over a risk recovery this morning. The dollar’s earlier gain versus the yen would seem to indicate confidence in the risk climate, which also underpins a positive performance for equity index futures. However, the riskier currencies are not making it stick supporting a view that recovering risk appetite is likely to be short-lived. 

Canadian dollar – The Canadian dollar is practically unchanged at 95.30 U.S. cents having reached 95.50 cents earlier this morning. The slide in crude oil prices accompanied by a lunge lower in global equities was enough to cap optimism over the Canadian unit. It appeared late last week that the Canadian unit might see a speedier recovery following the U.S. employment report.