The U.S. dollar fell across the board, retracing some of its recent losses as global equities rallied overnight. The greenback fell versus the New Zealand dollar after interest.co.nz reported China Investment Corp. planned to invest in the South Pacific nation’s assets. The so-called kiwi was also boosted as Finance Minister Bill English said the country aimed to double its export to China within four years. Australian’s dollar strengthened from a six-week low against the U.S. dollar as a government report showed business investment increased and stock gains boosted demand for higher-yielding assets. Sweden’s krona gained against both the greenback and the Euro as a report showed consumer and business confidence rose more than economists predicted. Meanwhile, the U.S. economic docket showed that the economy grew at a 1.8% annual rate in the first quarter, less than forecast, reflecting a smaller gain in consumer spending than previously calculated. The revised rise in gross domestic product was the same as estimated last month and compared with a 3.1% gain in the prior quarter. Consumer purchases fell short of forecasts, registering at 2.2% down from 2.7% the previous quarter. In addition, more Americans unexpectedly filed applications for unemployment benefits last week, a sign the labor market is struggling to gain momentum.
The Euro rose against the dollar as European Central Bank President Jean-Claude Trichet said policy makers are “carefully” monitoring inflation, fueling bets the economy is strong enough to withstand higher interest rates. The ECB needs to “avoid commodity-price increases becoming entrenched in longer-term inflation expectations, which could have second round effects on wages and prices,” Trichet said today. “We are carefully monitoring the situation and we stand ready to do whatever is necessary to fulfill our mandate.” The ECB raised its benchmark rate to 1.25% last month after keeping it at a record low of 1.0% for almost two years. Also, the Financial Times reported that European Financial Stability Facility Executive Officer Klaus Regling said Asian investors, including China, may buy Portuguese bailout bonds when EFSF sells them in June, easing concern that the region’s sovereign debt crisis will spread.
The Japanese yen maintained its tight range overnight versus the U.S. dollar as higher stocks put pressure on both safe-haven currencies. However, the Japanese yen has rallied versus the greenback in early trading after a report showed that GDP in the U.S. failed to meet economist’s expectations. Indeed, U.S. first quarter GDP registered at 1.8% versus an expectation of a 2.2% rise.
The British pound gained versus the U.S. dollar on risk assumption, but fell against the Euro as an index of sales volumes at U.K. consumer-service companies fell to the lowest since November 2009. The gauge of consumer-services companies dropped to minus 23 in the three months through May from minus 11 in the quarter through February, the Confederation of British Industry said today. The pound strengthened against the dollar yesterday as a report showed U.K. exports helped the economy resume growth in the first quarter, outweighing the biggest slump in consumer spending in almost two years.
