The U.S. dollar fell against most of its major counterparts and snapped a six-day rally against the Euro as rising stocks sapped demand for the greenback. Indeed, European and Asian equity markets rallied over 2.0% and the Dow Industrial Average is expected to open nearly a percent better this morning. The U.S. dollar lost the most versus the Australian dollar after a report showed gross domestic product growth quickened and Reserve Bank of Australia Governor Glenn Stevens signaled a willingness to keep interest rates unchanged. Aussie GDP expanded 1.2% in the second quarter from the previous three months, beating estimates of a 1.0% gain. The Dollar depreciated against the Swedish krona after the central bank said it only “slightly” cut its guidance for future increases in interest rates. The greenback was also under pressure amid speculation Fed Chairman Ben S. Bernanke will signal more monetary easing in a speech tomorrow. The economic docket showed that mortgage applications in the U.S. fell for a third consecutive week as fewer Americans refinanced, while purchases stayed close to a 14-year low. Later, the Federal Reserve will release its Beige Book that provides an assessment of economic conditions in its 12 U.S. districts.
The Euro rose for the first time in a week against the U.S. dollar as European stocks markets staged a strong rebound overnight. There was no major economic data released in the Euro-zone today but the currency found some strength as Germany’s top court rejected constitutional challenges to the nation’s participation in the region’s rescue funds. The Federal Constitution Court in Karlsruhe today threw out suits targeting the nation’s share of the 110 billion euros in loans for Greece from euro-region governments and the International Monetary Fund as well as a separate 750 billion euro rescue fund approved last year to halt the spread of Greece’s debt crisis.
The Japanese yen traded in a mixed direction overnight, falling against the higher-yielding Euro and pound while gaining against the U.S. dollar. The Bank of Japan kept monetary policy unchanged after adding 10 trillion yen of stimulus last month to combat a yen near a postwar higher. Governor Masaaki Shirakawa and his policy board kept the key benchmark interest rate between zero and 0.1% and left its credit and asset purchasing programs totaling 50 trillion yen unchanged. The move was in line with the majority of economists surveyed.
The British pound retraced some of its losses from the day prior against the U.S. dollar but fell against the majority of its rivals as a report showed U.K. house prices fell more than economists predicted last month, bolstering the case for more economic stimulus from the Bank of England. Home prices fell 1.2% in August, after increasing 0.2% in July, Halifax reported today. A separate report showed that industrial production fell 0.2% in July after being stagnate in June.
