The U.S. dollar gained modestly overnight, rebounding from slight losses late yesterday and remaining near the best level versus the Euro since February. Continued worries surrounding the European debt crisis and the increasing chance of a Greek default have boosted demand for the U.S. dollar as a safe-haven. The greenback also pushed higher against the Norwegian krone after the Nordic’s nation’s interest-rate expectations declined. Meanwhile, the economic docket showed that the prices of goods imported into the U.S. fell in August for the second time in three months as the cost of oil and food dropped. The 0.4% decline in the import price index followed a 0.3% increase in July, Labor Department figures showed today in Washington. Slower growth in Europe and emerging economies like China, together with less U.S. demand, may restrain the cost of goods from abroad. The data has had little effect on the direction of the U.S. dollar in early trading and with no more data slated for today, the greenback could find continued support as stock futures foreshadow a lower open.
The Euro held near a 7-month low against the U.S. dollar after rebounding modestly yesterday afternoon. The euro came under renewed pressure as Italy’s borrowing costs rose at a sale of 3.9 billion euros of bonds. Italy’s Treasury sold five-year bonds at an average yield of 5.6%, compared with 4.93% in July. Meanwhile, credit-default swaps now signal a 98% probability that Greece will default on its debt. German Chancellor Angela Merkel said in an interview today she won’t let Greece fall into “uncontrolled insolvency” because the risk of contagion for the other euro-zone countries “is very big.” The European Central Bank, International Monetary Fund and the European Commission will return to Greece this week, Merkel said. As the debt crisis deepens, expect the common currency to remain under pressure against the majority of its rivals.
The Japanese yen strengthened against all of its major peers as risk aversion prompted investors to buy the currency as a refuge. It has appreciated 2.9% in the past week against a basket of its counterparts. The yen tends to appreciate during economic and financial turmoil because Japan’s current-account surplus makes the nation less reliant on foreign capital.
The British pound slipped versus the U.S. dollar as stocks declined across Europe and Italian borrowing costs surged at a debt sale. The FTSE 100 index of stocks fell 0.4% while the Stoxx Europe 600 index lost 0.5%. Meanwhile, the economic docket showed that real estate price expectations fell to –23 last month from –13. The number of real estate agents and surveyors saying prices fell last month exceeded those seeing gains by 23 percentage points, according to the Royal Institution of Chartered Surveyors’. Meanwhile, inflation continues to hold at levels more than double that of the Bank of England’s target. Consumer prices rose 4.5% from a year earlier compared with 4.4% in July, the Office for National Statistics said today in London.
