Financial Watch

The U.S Dollar edged down versus the EUR during the session as traders look ahead to key U.S. economic data and congressional testimony from Federal Reserve Chairman Ben Bernanke later today. Traders will listen closely for any hints of changes to how long the Fed may keep Interest Rates on hold.

USD – Dollar falls vs. Yen as Trade Deficit Widens
The Dollar rose against the EUR on Tuesday after a Greek debt auction showed the market asked a high price to hold the assets and Greece’s fiscal crisis would continue to weigh on the single currency. The Dollar also gained on talk among traders that a U.S. think tank report said the Federal Reserve was closer to raising one of its key Interest Rates.

China has resisted pressure from the US to raise the value of the Chinese yuan.

China’s official Xinhua news agency said Hu Jintao, the Chinese president, had indicated that the authorities were prepared to change their policy in their own time.

The two presidents met on the sidelines of a nuclear summit in Washington on Monday, and Obama had called on Hu to switch to a more “market oriented” exchange rate.

However, Hu defended China’s policy of pegging the yuan to the dollar and said changes to the exchange rate would not come from US pressure.

Amid a clamor in Washington over the value of the Chinese currency, President Hu Jintao used a visit to the United States this week to address what, for any Chinese leader, is a more pressing concern: asserting his nationalist credentials in the face of foreign pressure.

Hu, who arrived in Washington on Monday for the Nuclear Security Summit, told President Obama that China is reviewing its currency policy. But he stressed that any modification “will not be advanced by outside pressure,” according to official Chinese media reports Tuesday, and will be based on China’s “own economic and social development needs.”

European investors who own foreign stocks and shares have been forced to ride a euro roller coaster this year as Greece’s debt crisis has produced successive waves of currency volatility. When Greek Prime Minister George Papandreou announced last month that he may turn to the International Monetary Fund to alleviate the country’s fiscal problems, the euro dropped 1% against the dollar to $1.36.

With decent investment returns hard to come by at the moment, such movements can really hurt a portfolio’s bottom line. The most cautious investors are beginning to wonder whether they should try and protect themselves from such fluctuations; the more ambitious are looking at ways to take financial advantage of them.

HONG KONG – The yuan is likely to remain in the spotlight this week with expectations Beijing that is ready to raise its rate against the dollar by 2%-3%

But we are still a long way from a full yuan float, given the uncertainty surrounding how the currency would respond if the capital account was thrown open and investors took a closer look at China’s fundamentals. Most likely Beijing is expected to revert to a managed peg. as it had between 2005 and 2008, to allow a small daily movement within a band. Still, this does mean in theory the currency can move in both directions.

U.S. stock futures pointed slightly higher Friday as investors eyed earnings from Oracle Corp. and also awaited the latest reading of fourth-quarter U.S. growth.

Futures for the Dow Jones Industrial Average gained 27 points. S&P 500 futures rose 2.7 points to 1,165.40 and Nasdaq 100 futures gained 4.25 points to 1,953.75.

U.S. markets ended mixed Thursday after an early rally evaporated as a strengthening dollar sapped gains in commodities and related shares, and further weak demand for Treasury notes also weighed. The Dow Jones Industrial Average closed up around 5 points, while the S&P 500 fell 1.99 points and the Nasdaq Composite declined 1.35 points.