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.
