Excerpt from our Wall Street Breakfast, a one-page summary of this morning's key market-moving and stock-moving stories:
A New High — for the Trade Deficit [Business Week] and China's Foreign Currency Reserves Surge to Almost $1 Trillion [Bloomberg]
Summary: The dollar initially slipped in response to the trade deficit report, but then recouped its losses and remained in a narrow band. The trade gap widened to $69.9 billion in August, 2.7% higher than in July and higher than economists' median forecast of $66.6 billion. Imports rose 2.4% following a gain of 0.9% in July, while exports rose 2.3% following a decline of 1.3% in July. Import growth was driven by a rise in oil import volumes and pricing. Economists trimmed their Q3 GDP estimates as they revised up their import projections. China's trade surplus with the US rose 12% to a record $21.96 billion for August, pushing its reserves to almost $1 trillion. Chinese premier Wen Jiabao has admitted that reserves have caused a surge in the money supply that triggered a credit-fuelled investment boom.
More commentary on the dollar: ECB Raises Rates, Dollar Doesn't Weaken • Significance of the Surprisingly Weak Yen • Consumer Confidence is Helping the Dollar • Will Debt Payments Drag Down GDP or the Dollar? • Chart of Euro versus the dollar (via the ETF).
Potentially impacted currency ETFs: CurrencyShares Euro Trust Euro Currency (NYSEARCA:FXE), CurrencyShares Swiss Franc Trust (NYSEARCA:FXF), CurrencyShares Mexican Peso Trust (NYSEARCA:FXM), CurrencyShares Swedish Krona Trust (NYSEARCA:FXS), PowerShares DB G10 Currency Harvest Fund (NYSEARCA:DBV) , CurrencyShares Australian Dollar Trust (NYSEARCA:FXA) , CurrencyShares British Pound Sterling Trust (NYSEARCA:FXB).
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