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US$ Falls To Record Low Versus Swiss Franc

The U.S. dollar continued to fall overnight as European equities ticked higher, sapping demand for the U.S. dollar as a safe-haven.  The U.S. dollar index is poised for its fifth monthly drop.  The Swiss Franc traded to a record high against the greenback after Swiss central bank President Philipp Hilderbrand hinted at higher interest rates to reign in inflation and strong economic data boosted demand for the currency.  Switzerland’s leading indicator unexpectedly increased to the highest since August 2006, signaling the economy is gaining momentum.  Meanwhile, the U.S. economic docket showed consumer spending in the U.S. climbed in March as Americans spent more on food and fuel, indicating further income gains are needed to boost the biggest part of the economy.  Purchases rose 0.6% after a revised 0.9% gain the prior month, according to the Commerce Department.  Personal income climbed 0.5%, more than projected.  Nevertheless, expect the dollar to continue to trade on its back foot against most of its counterparts.

The Euro maintained its monthly rally versus the U.S. dollar as the region’s inflation accelerated to the fastest pace in two and a half years, adding to signs the recovery is gaining momentum.  Price pressures in the 17-nation euro region quickened to 2.8% in April from 2.7%, the European Union’s statistics office in Luxemburg said today in an initial estimate.  Europe’s seasonally adjusted jobless rate held at 9.9% in March, the lowest since January 2010.  A separate report showed an index of executive and consumer sentiment slipped to 106.2 from 107.3 in March, the sharpest drop since May 2010. 

The Japanese yen pushed higher versus the U.S. dollar even after the U.S. released better than expected consumer spending and personal income data.  The yen fell to the lowest level against the Euro since December 2009. Japanese markets are shut today for a public holiday and Japan will be closed most of next week for the celebration of Golden Week. 

The British pound gained modestly overnight on general U.S. dollar weakness as European stocks continued to push higher.  However, expect the sterling to remain in tight ranges as the United Kingdom is closed for the wedding of Prince William and Kate Middleton. 

US$ Continues to Fall Ahead of Bernake's Comments

The U.S. dollar continued its decline against most of its major rivals as increased risk appetite weighed on the safe-haven dollar.  Indeed, the greenback fell to the lowest level in 16 months against the Euro and the U.S. dollar index dropped for a seventh day on speculation the Federal Reserve will signal it will keep interest rates low at today’s meeting to support the U.S. economy after its bond-buying program expires in June.  The Australian dollar rose to a record after a report showed consumer prices climbed the most since 2006, increasing bets that the central bank will continue to raise interest rates.  Meanwhile, the economic docket showed that orders for U.S. long lasting goods rose in March for a third consecutive month, showing businesses intend to keep spending update equipment.  Durable goods climbed 2.5% after a 0.7% gain the month prior.  Markets may remain in tight ranges in early trading today as market participants await the Federal Reserve’s FOMC interest rate decision.  The Fed is widely expected to leave its target rate for overnight lending at 0.0%- 0.25%.  Investors will keep a keen eye on Chairman Ben Bernake’s first post-decision press conference at 2:15 p.m.  The central bank may indicate it plans to complete $600 billion in Treasury purchases by the end of June, a program known as quantitative easing. 

The Euro continued its bullish run versus the U.S. dollar, breaking fresh 16-month highs, as global equities pushed higher again today.  The common currency has gained for seven straight days against the greenback, the longest winning streak since March 2009, amid signs growth is quickening in the 17-nation region.  Indeed, a report showed industrial orders gained for a fifth month in February, led by demand for capital goods. Orders rose 0.9% from January, when they increased 1.2% the European Union’s statistics office said today.  The ECB, which aims to keep inflation below 2.0%, raised interest rates this month by a quarter-percentage point to 1.25%.  The central bank left the door open for more rate increases even as the sovereign debt crisis tempers growth in peripheral countries such as Portugal. 

The Japanese yen weakened against all of its major counterparts as stocks rose and Standard & Poors cut Japan’s debt outlook.  The outlook on Japan’s AA- local-currency government debt rating, the fourth-highest grade, was lowered from “stable” to “negative.”  S&P cited costs for rebuilding from the country’s record earthquake on March 11^th.  The reconstruction will require more borrowing, boosting net government debt to 145% of gross domestic product in 2013, compared with an earlier forecast of 137%, S&P estimated.  S&P reduced the rating by one step in January in the first cut since 2002.   

The British pound jumped against the dollar after a report showed Britain’s economy rebounded in the first quarter on the strongest surge in service-industry growth in four years.  Gross domestic product expanded 0.5% after contracting the same amount in the fourth quarter, the Office for National Statistics said today in London.  The print was largely in line with expectations.  Services, which make up 76% of the economy, grew by 0.9%. 

US$ Continues to Fall Ahead of Tomorrow's Fed Decision

The U.S. dollar continued its decline and fell for the sixth day against the Euro, matching its longest streak since May 2009, on speculation the Federal Reserve will discuss measures to keep yields low to support the economy. The Dollar Index, used to track the currency versus those of six major U.S. trading partners, neared it lowest level since August 2008. The U.S. central bank is widely expected to leave its target rate for overnight lending at a record low of 0.0%-0.25% at its two day meeting starting today, according to a survey by Bloomberg. Some expect the Fed to consider measures to continue to support the economy as the end of its $600 billion asset purchase program, or QE2, approaches in June. The U.S. dollar continues to fall versus the Swiss franc, which has gained as Switzerland’s economy is gaining momentum as demand from Asia and the Euro area bolsters the Alpine country’s exports. Indeed, the Swiss government last month raised its forecast for 2011 export gains to 4.1% from 2.6%. Today’s economic docket is expected to show the S&P Case-Shiller index of home prices in 20 U.S. cities for the 12 months through February fell 3.3%, the biggest decline since November 2009.

The Euro rose against the U.S. dollar and the yen as European Central Bank President Jean-Claude Trichet suggested policy makers stand ready to raise interest rates further to counter inflation expectations. “We have risks of second-round effects here and there,” Trichet said in an interview released today. Second-round effects refer to an increase in consumer prices prompting bigger wage increases that then feed through to faster inflation. Trichet continued to say, “it is extremely important to continue solidly anchoring inflation expectations in a period which is market by uncertainties and turbulences.” With no major economic data released today, the common currency also found support as European equity indexes rose after being closed for the Easter holiday.

The Japanese yen gained versus the U.S. dollar as falling Asian equities stoked demand for the safe-haven currency. The yen also found support against the greenback on speculation the Federal Reserve will discuss measures to keep yields low to support the economy. Nevertheless, we expect the Japanese yen has a limited upside in the future due to speculation that the Bank of Japan will once again threaten to intervene if the yen continues to strengthen.

The British pound declined against the U.S. dollar after a report showed growth in factory orders slowed in April. The Confederation of British Industry’s orders gauge slipped to -11 from a +5 the month prior. Meanwhile, Bank of England policy maker Andrew Sentance said global growth, higher oil prices and a weak pound may keep inflation above the bank’s target for “some time” and further undermine the Monetary Policy Committee’s credibility. Sentance has led the call for higher interest rates on the MCP, which has continued to be split towards monetary policy. Investors will now await British Gross Domestic Product data tomorrow, which is expected to show the economy, grew at 0.5% after contracting 0.5% in the fourth quarter.

US$ Largely Unchanged As Most Markets Remain Closed

The U.S. dollar opened today’s session largely unchanged from Friday as most of the world’s global markets remained closed in observance of Easter Monday.  Indeed, markets in Europe, England, Australia, New Zealand and Hong Kong will not reopen until Tuesday.  The greenback could see modest selling pressure throughout the day on risk assumption as U.S. equity futures are expected to open the week higher.  The dollar remains near the weakest levels in over 16-months against the Euro on speculation the European Central Bank will raise interest rates further, while the U.S. Fed maintains its easy monetary policy.  The ECB, which aims to keep inflation below 2%, this month raised interest rates by 25 basis points to 1.25%.  It left the door open for more rate increases as a sovereign debt crisis tempers growth in peripheral countries such as Greece, Portugal and Ireland.  Meanwhile, today’s economic docket is expected to show that new home sales in the month of March rebounded to 12.0% after falling 16.9% the month prior.  Tomorrow sees the release of the S&P Case Shiller Home price index and consumer confidence followed by durable goods orders and the Fed’s interest rate decision on Wednesday.  The Fed is widely expected to hold interest rates at a record low as inflation pressures remained muted in the world’s largest economy.  Gross Domestic Product, weekly jobless claims and pending home sales will be released on Thursday, and personal income, Chicago PMI and consumer sentiment will round out the week on Friday. 

US$ Falls to Multi-Year Lows Versus Many Counterparts

The U.S. dollar continued its weekly decline falling against all of its major counterparts as signs global growth is being sustained boosted demand for higher-yielding assets.  Stocks in Asia and Europe rose, pushing the U.S. dollar to its lowest level in 16 months versus the Euro.  The greenback depreciated to the weakest levels in at least 40 years against the Swiss Franc and to the lowest level in 2 ½ years against the Swedish Krona.  The Australian dollar climbed to new highs and is currently trading at its strongest level since the currency was freely floated in 1983.  Producer prices in the oceanic country rose 1.2% in the first quarter, indicating further interest rate hikes may be necessary.  Foreign Minister Kevin Rudd ruled out intervention in the Aussie, which has gained 16% this past year against the U.S. dollar.  Meanwhile, jobless claims decreased by 13K to 403K last week, Labor Department figures showed today.  Later this morning, a report is expected to show home prices in the U.S. fell 0.3% in February.  In addition, leading indicators is expected to rise 0.3% after gaining 0.8% the month prior.

The Euro extended its rally versus the U.S. dollar, touching 16-month highs on widespread risk assumption.  European stocks rose for a third day, after earnings from companies such as Akzo Nobel NV and Apple Inc. exceeded analysts estimates.  The common currency stayed higher against the U.S. dollar even after a report showed business confidence in Germany fell for a second month in April after oil prices rose to the highest level in 2 ½ years.  With U.S. equities poised for a higher open, expect the Euro to hold its gains during our trading session before Europe closes for the Easter Holiday.  European banks will be closed for Good Friday and Easter Monday.

The Japanese yen remains under pressure against its higher-yielding counterparts as global equities continue to surge.  However, the yen continued its rebound versus the U.S. dollar and has settled into pre-earthquake ranges.  The Bank of Tokyo-Mitsubishi UFJ Ltd., has argued that the dollar may retrace its losses versus the yen and other currencies as investors judge that declines are going beyond what’s justified by the outlook for monetary policy and bond yield spreads.  

The British pound surged to a fresh yearly high ahead of the holiday weekend as the economic docket reinforced an improved outlook for the U.K.  Indeed, Britain’s budget deficit came in below economist estimates, buoying confidence in the U.K. economy and strengthening the case for higher interest rates. Public sector net borrowing increased 16.4 billion pounds in March amid projections for a 18.7 billion pound expansion.  In addition, household spending in Britain increased 0.2% in March to exceed forecasts for a 0.4% decline.

US$ Retraces Some of Yesterday's Losses as Stocks Rebound

The U.S. dollar retraced some of its large gains from yesterday’s trading session as European equities rebounded and American stock futures foreshadow a higher open, sapping demand for the currency as a safe-haven.  The greenback fell to a two-week low against the Canadian dollar as inflation accelerated to the fastest pace since September 2008, encouraging bets the Bank of Canada may resume boosting borrowing costs.  The dollar fell the most against the Swedish Krona before tomorrow’s interest rate decision.  The Riskbank, Sweden’s central bank, will raise its benchmark interest rate by 25 basis points to 1.75% at the conclusion of their meetings according to all 26 economists in a Bloomberg survey.  Meanwhile, the U.S. economic docket showed that housing starts rebounded modestly in March after falling in February.  Work began on 549K houses at an annual pace, up 7.2% from the prior month.  Housing, which pushed the economy into the recession, remains the weak link in the recovery and continues to weigh on consumer spending. 

The Euro rallied against the U.S. dollar as European stocks rebounded from their biggest drop in a month on strong corporate earnings, increasing demand for higher-yielding assets.  The common currency also found support after a report showed German manufacturing growth unexpectedly accelerated, adding to speculation that the European Central Bank will raise interest rates further.  Indeed, Germany’s purchasing managers’ index climbed to 61.7 from 60.9 in March, according to Markit Economics.  European Central Bank Governing Council Member Nout Wellink said the central bank’s April 7^th interest-rate increase sent to investors an “extremely important” signal aimed at preventing expectations of higher inflation.  While Wellink didn’t explicitly ratify market forecasts that the ECB’s policy rate will rise an additional 50 basis points their year, he made it clear the central bank will keep inflation control its main policy goal. 

The Japanese yen held its favorable range versus the U.S. dollar and higher-yielding currencies, as Asian equities remained lower. Meanwhile, Japan’s consumer confidence fell the most on record last month after the nation’s unprecedented earthquake, adding to signs the world’s third largest economy may contract this quarter.  As the Japanese economy will likely remain weak throughout the year, many analysts believe the yen will weaken in the second half of the year.  Indeed, in a research note Mizuho Corporate Bank Ltd. said Japan’s yen may depreciate more than 8.0% over the next year as the nation struggles to revive its economy and restrain a widening budget deficit. 

The British pound rebounded slightly versus the U.S. dollar overnight as increased risk assumption weighed on the greenback.  The pound also gained as wagers on interest-rate increases by the Bank of England rose for the first time in three days.  The pound has traded in a 3% range over the past two months as investors continue to speculate whether more Bank of England officials will vote for tightening to contain inflation.  U.K. consumer price inflation data for April will be published on May 17^th.  It unexpectedly slowed in March for the first time in eight months. 

US$ Rises Versus Euro as Greek Debt Rises to Record

The U.S. dollar gained against all of its major counterparts, except the Japanese yen, on widespread risk aversion as speculation that Greece will be unable to avoid a default drove stocks lower.  Asian stocks fell after China raised banks’ reserve requirements to cool inflation and Central bank Governor Zhou Xiaochuan said monetary tightening will continue for “some time.”  The greenback could see continued strength throughout our trading session as U.S. stock futures foreshadow a lower open for American shares.  The U.S. dollar also rallied versus the New Zealand dollar as data showed consumer prices for the island nation rose less than forecast and the prices of many commodities fell.  With only the NAHB Housing market index due out later this morning, expect the greenback to trade with the prevailing risk sentiment.  Tomorrow sees the release of Housing starts, followed by existing home sales on Wednesday.  Weekly jobless claims and the Philadelphia Fed survey are slated for Thursday morning.  There will be no economic data released on Friday, as many markets will be closed for the Good Friday holiday. Banks will remain open on Friday.

The Euro fell over 1.0% against the U.S. dollar on speculation Greece will be unable to avoid default, even after officials said debt restructuring isn’t being discussed.  The cost of insuring Greek government debt rose to a record today, with contracts indicating investors see a 65% the nation will default within five years.  Greece received a bailout from the European Union and the International Monetary Fund last year, and has been followed by Ireland and Portugal in seeking aid.  The common currency also came under pressure on concern election gains by Finland’s euro-skeptic block will hinder regional efforts to assist ailing nations.  The True Finns political party will seek a majority that allows them to block the euro region’s bailout mechanism, party leader Timo Soini said over the weekend.  Nevertheless, concerns over the periphery countries may not be enough to stop the European Central Bank policy makers from raising interest rates again this year.  Indeed, Austria’s Ewald Nowtony said in an interview that expectations that the key rate will be increased by another 50 basis points in 2011 are “well founded.”

The Japanese yen gained against all of its most-traded rivals as global equities faltered, boosting demand for the yen as a safe-haven.  Asian stocks fell as China’s central bank raised the reserve requirement ratio for lenders for the fourth time this year.  The effort to cool inflation is also likely to weigh on growth, lowering stocks.  The ration will increase by 0.5 percentage points effective April 21, the People’s Bank of China said today. 

The British pound fell versus the U.S. dollar as lagging global equities boosted demand for the greenback as a safe-haven.  Ernst & Young cut its yearly growth forecast and indicated it sees no pressure for the Bank of England to raise interest rates.  U.K. domestic product may rise 1.8% instead of the 2.3% projected in January.  The economic docket showed that London home sellers raise asking prices to a record in April.  Average asking prices in the capital rose 1.6% from the previous according to Rightmove Plc.

US$ Mostly Unchanged, Gains Versus the Euro

The U.S. dollar held a mostly flat range overnight against most of its counterparts ahead of a slew of economic data slated for release today in the U.S.  However, the greenback did push modestly higher versus the Euro after Moody’s Investors Services lowered Ireland’s credit rating, stoking concern that Europe’s debt crisis may worsen as Greece battles to avoid a bond restructuring.  The U.S. economic docket showed that the cost of living in the U.S. rose in March for a ninth consecutive month, led by increases in food and fuel costs that have yet to filter down to other goods and services.  The CPI index increased 0.5% for a second month, in line with economists forecast.  Also, manufacturing in the New York region expanded in April at the fastest rate in a year, a sign that factories will further propel the economic expansion.  Later today, Industrial production is expected to rise 0.6%.

The Euro slid versus most of its rivals after Moody’s cut Ireland to the lowest investment grade and indicated more downgrades may follow.  Yesterday, Germany’s finance minister and Standard & Poor’s said Greece may need to restructure debt to avoid defaulting.  Greece will announce more than 22 billion euros of deficit-reduction measures through 2014 today, according to Finance Minister George Papacontantinou.  Nevertheless, the Euro has gained nearly 8.0% versus the dollar this year on bets accelerating inflation will prompt policy makers to raise interest rates.  Indeed, a report showed that inflation for the 17-nation region accelerated more than forecast to 2.7% in March, the fastest pace in more than two years. 

The Japanese yen gained and Asian stocks fell on concern China and India will act to cool growth after inflation accelerated.  Price pressures in China, the world’s second largest economy climbed 5.4% in March from a year earlier, the fastest pace since 2008.  India’s wholesale prices also rose more than forecast.  Although China’s growth remains robust, speculation that China will raise interest rates further to cool growth and price pressures by raising interest rates has weighed on stocks and boosted demand for the yen as a safe-haven.

The British pound rose against the Euro but remained unchanged versus the U.S. dollar overnight.  Bank of England policy maker Andrew Sentance said in a an interview with Bloomberg yesterday that a rate increase to boost the currency wouldn’t be “unwelcome,” because a slowdown in inflation may be short-lived.  “We’re going to see further upward move in inflation through the summer,” and “there’s clearly a risk that inflation goes up to 5% of a bit above,” Sentance said.  While consumer-price growth unexpectedly slowed to 4.0% in March, its still double the central bank’s target for inflation. 

US$ Dollar Falls Modestly As Price Pressures Remain Muted

The U.S. dollar traded in a mixed direction overnight, gaining against the Euro on renewed sovereign debt concerns but falling versus the Pound as British consumer sentiment rose from a record low.  The New Zealand dollar rose to a 5-month high against the greenback after increased demand for an auction of government bonds.  Singapore’s dollar rallied to a record high after its central bank said it would allow faster appreciation to combat inflation after its economy grew quicker than economists forecast.  Meanwhile, the U.S. economic docket showed that wholesale costs in the U.S. rose 0.7% in March, led by higher prices for energy.  The increase in the producer-price index was smaller than forecast as food prices unexpectedly dropped for the first time since August, Labor Department figures showed today in Washington.  The median projection in a Bloomberg survey was a 1% gain.  The muted price pressures will likely weigh on the dollar as the Federal Reserve will likely find the scope to hold interest rates near zero for most of the year.  Also, more Americans unexpectedly filed first-time claims for unemployment insurance last week.  Applications rose 27K last week, the most in two months.

The Euro dropped against most of its counterparts on concern Greece and other nations may be forced to restructure their debt payments, encouraging demand for a refuge.  German Finance Minster told a newspaper that Greece may need to negotiate with creditors if an audit in June questions the nation’s ability to make debt repayments.  At the same time, the head of Standard & Poor’s European sovereign ratings, said the risk of Greek debt restructuring has risen, and losses to bondholders may be 50%-70%.  As a result, Portuguese and Greek bonds slumped, weighing on the currency.  Traders will also pay attention to the Bank of Spain as they approach a deadline to approve a restructuring plan for the nation’s “cajas”, the small savings banks at the heart of the nation’s real estate bubble. Spain remains at the center of sovereign debt concerns, as the nation is believed to be too large to be bailed out by the current EFSF rescue fund. 

The Japanese yen gained against most of its major counterparts as Asian stocks fell and leaders of the so-called BRICS nations said rising commodity prices posed a threat to global growth.  Leaders of Brazil, Russia, India, China and South Africa called for greater regulation on derivatives on resource markets to limit their volatility.  The leaders said “excessive volatility in commodity prices, particularly those for food and energy, poses new risks for the ongoing recovery of the world economy,” boosting demand for the currency as a safe-haven.

The British pound strengthened against the U.S. dollar and the Euro as a report showed U.K. consumer confidence rose in March from a record low, adding fuel to the argument that the central bank may increase interest rates.  The index of sentiment gained to 44 from a revised 39 in February, which was the lowest since records began in 2004, the Nationwide Building Society said today.  The pound has extended its gains in early trading after U.S. economic data showed minimal price pressures in the world’s largest economy. 

US$ Falls As Global Equities Rise, Data Improves

The U.S. dollar fell against all of its major rivals overnight, save the Japanese yen, as global equities rebounded from yesterday’s decline and data showed the Euro-zone economy is improving, sapping demand for the greenback and the yen as safe-havens.  Sweden’s krona rose the most against the dollar after the government raised its economic growth forecast for the next two years, spurring speculation that interest rates will rise over the coming year.  The New Zealand dollar rose after the Real Estate Institute said its index of house prices increased for a second month.  The greenback also fell against the Aussie dollar after an industry report showed consumer confidence improved in April.  Nevertheless, the U.S. economic docket showed that sales at U.S. retailers rose in March for a ninth consecutive month, adding proof that an improving job market is helping Americans cope with higher costs for fuel and food.  Purchases increased 0.4% following a 1.1% February gain that was larger than previously estimated, Commerce Department figures showed today. 

The Euro rose and stayed within one percent of the 15-month high reached earlier this month as strong economic data raised speculation that the European Central Bank will outpace the Federal Reserve as its raises rates to combat inflation.  The ECB will raise its benchmark by 109 basis points over the next 12 months, according to an overnight swaps index.  A similar gauge for the U.S. predicts the Fed will increase rate by only 35 basis points over the same period.  European Central Bank board member Luc Coene said the April rate hike shouldn’t be written off as a one-time deal according to an interview with Trends magazine, and expects the economic recovery to gather pace over the coming months as monetary policy remains highly supportive.  Industrial production in the euro-area rose 0.4% in February, according to the European Union.  The print failed to meet economist’s expectations, but represents an increase for the fifth straight month. 

The Japanese yen dropped against all of its rivals as European equities rebounded and data showed America’s retail sales rose for a ninth month, dampening demand for the safe-haven currency.  The yen rallied yesterday after Japan raised it’s the severity rating of the nuclear crisis that began last month at damaged power plant to the level of the 1986 Chernobyl disaster.  The yen may see increased headwinds over the coming months as the island nation attempts to rebuild from the recent earthquakes and tsunami. 

The British pound pushed modestly higher versus the U.S. dollar on widespread risk assumption, but fell to a 6-month low versus the Euro as the British economic docket showed the economy is still frail.  U.K. jobless claims rose by 700 in March amid expectations for a 3,000 drop.  Nevertheless, the unemployment rate fell to 7.8% from 8.0% the month prior.  As yesterday’s data showed inflation pulling back from recent highs and economic data continues to show a sluggish private sector, investors may start to scale back expectations for future interest rate increases over the coming months.