The U.S. dollar continued its rally overnight, gaining against nearly all of its major counterparts as widespread risk aversion buoyed the greenback. Asian equities fell after China raised bank’s reserve requirements for the fifth time this year to restrain prices, adding to the likelihood that growth will slow in the world’s second-biggest economy. The Stoxx European 600 index slid over 1.0% on bets Greece may have to restructure debt. The greenback gained the most versus the Australian dollar as investors trimmed bets on central-bank increases after employment dropped by the most since 2009. The dollar also saw a boost versus other commodity currencies as oil declined after the International Energy Agency lowered its 2011 global oil demand forecast for the first time as this year’s price rally begins to weigh on consumption. As a result, the Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, climbed to the highest level in three weeks. Meanwhile, the economic docket showed that wholesale costs in the U.S. rose more than forecast in April, led by higher prices in food and fuel. The 0.8% increase in the producer-price index compares with the 0.6% median estimate of economists, Labor Department figures showed today. Also, sales at U.S. retailers rose in April, reflecting gains at service stations and grocery stores. The 0.5% increase was the smallest since July and followed a 0.9% March gain, according to the Commerce Department. Weekly jobless claims registered largely inline with expectations.
The Euro slid to a 5-week low against the U.S. dollar as European Union Economic and Monetary Affairs Commissioner Olli Rehn said a Greek debt restructuring would have “devastating implications.” Officials from the EU, European Central Bank and the International Monetary Fund yesterday began their fourth evaluation of Greece’s economy. Rehn said the delegation will need “a few weeks” to determine Greece’s financing needs and the potential size of any new aid package. With U.S. equities pointing towards a lower open, the common currency could see continued selling pressure throughout our trading session.
The Japanese yen strengthened against all of its most-traded peers as investors sought the safety of the Japanese currency amid slumping equities and commodity prices. Asian equities came under downward pressure after the People’s Bank of China said that the reserve ratios for its lenders will increase by 0.5% on May 18th. There was no major economic data released for the island nation today.
The British pound fell against the dollar after a report showed manufacturing rose less than estimated, giving the Bank of England leeway to hold its main interest rate at a record low to spur growth. Manufacturing output rose 0.2% in March from the month before, the Office for National Statistics said today. The print missed estimates for a 0.3% increase. A separate survey showed industrial production gained 0.3% from February, below the 0.8% forecast.
