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 11th. 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%.
