The US dollar fell against a basket of currencies on expectations the Federal Reserve will keep interest rates low for an extended period, encouraging investors to buy riskier assets at the expense of the dollar. Analysts do not foresee an interest rate increase until the second half of this year. Data from the Commerce Department said housing starts fell 5.9% to a seasonally adjusted rate of 575,000 units, reversing the prior month's gain.
The euro strengthened against the dollar after German's ZEW index came in higher than expected. The Mannheim-based ZEW economic think tank reported its monthly poll of economic sentiment came in at 44.5 in March, boosting prospects of a more durable upturn for Europe's largest economy after a weak first quarter. The European Council agreed to the technical modalities that would permit aid to help debt-stricken Greece financially, but did not provide any other details.
The British pound recouped early losses aided by robust housing data and opinion polls. Stronger than expected housing data from DLCS showed prices rose 6.2% year-on-year in January. Opinion polls showing Britain's main opposition Conservatives were back on course to win the upcoming election helped to shore up sentiment on the day.
The Japanese yen strengthened overnight as Japanese firms repatriated funds ahead of the fiscal year-end on March 31, but came under pressure on speculation the Bank of Japan is leaning towards monetary easing steps this week.
The Canadian dollar resumed its rally against the US dollar, hovering near 20-month highs, after stronger than expected factory sales and labor productivity data's. Statistics Canada reported manufacturing shipments rose by 2.4% in January, the fifth consecutive monthly increase. It further reported labor productivity grew 1.4% in the fourth quarter of 2009, the first increase in more than a year.
The Australian and New Zealand dollars edged higher supported by firmer oil and gold prices. The Aussie bounced from overnight lows on expectations that interest rates will rise after minutes from the Reserve Bank of Australia's March policy meeting.
10-Year Treasury Note Yield: 3.678%
Dow Jones Industrial Average: 10,651.60 + 9.52
This market summary is prepared by Union Bank's Global FX Department for the general information of its customers. It is based on the most accurate information currently available, but should not be considered investment advice or a guarantee of future exchange rates or trends.