The U.S. dollar fell across the board, losing nearly 1.0% against the Euro, as the International Monetary Fund was said to seek a $500 billion expansion to its lending resources to safeguard the global economy. The Washington-based lender currently has about $385 billion available to lend and wants to lift that to $885 billion, according to a person familiar with the talks. The IMF is pushing China, Brazil, Russia, India, Japan and oil-exporting nations to be the top contributors. The Fund wants the agreement struck at the Feb 25-26 meting of G-20 finance ministers and central bankers in Mexico City, the official said. The safe-haven dollar also came under pressure ahead of improving economic data for the world’s largest economy. Industrial production in the U.S. is expected to increase 0.5% in December after a 0.2% drop in the previous month. Also, the National Association of Home Builders Index of builder confidence is expected to climb to 22, the highest level since May 2010. In addition, the docket showed that wholesale prices in the U.S. unexpectedly dropped in December; consistent with the Federal Reserve’s assessment that inflation remains tame. The producer price index fell 0.1%, the second decrease in the past three months, Labor Department figures showed today.
The Euro jumped across the board as the IMF looks to raise its lending capacity by as much at $500 billion to insulate the global economy against any worsening of Europe’s debt crisis. Meanwhile, Greece will resume talks today with the Institute of International Finance, which represents private creditors. The IIF broke off negotiations last week after failing to agree with the government about how much money investors will lose by swapping their bonds. The Greek government is close to a deal with bondholders that would give them cash and securities with a market value of about 32 cents per euro of debt, according to a committee member of the 32 creditors.
The British pound gained modestly against the U.S. dollar but fell against the Euro as the nation’s economic docket disappointed. U.K. unemployment rose to the highest rate in 16 years in the quarter through November, deepening concerns Britain is heading for another recession as turmoil in the euro-zone dampens the global economic outlook. The unemployment rate rose to 8.4%, the highest since January 1996, up from 8.1% in the previous quarter. In addition, the number of people claiming jobless benefits rose for a 10th month to 1.6 million. In addition to slow growth in the Euro-zone weighing on the British growth, the problems with the economy are being compounded by Prime Minister David Cameron’s budget cuts. The austerity measures have dragged on consumer confidence and will lead to about 700K jobs cut through early 2017.
