The US dollar is under pressure after the Federal Reserve maintained its pledge to keep interest rates low for an extended period of time while upgrading its assessment of economic conditions. The Labor Department reported US producer prices fell 0.6% in February the largest decline since July as energy costs tumbled, providing further reason to keep rates steady.
Asian Development Bank President Haruhiko Kuroda said the dollar-denominated global reserve system needs to be reformed to better fit economic reality and ensure global financial stability. Kuroda's comments follow growing discussions amongst policymakers and academics that the world should no longer rely on a single currency as a reserve currency.
The euro edged higher and hit a fresh five-week high against the dollar overnight, buoyed by easing sovereign risk concerns after Standard and Poor's removed Greece's ratings from review for downgrade. The European Union's statistics office Eurostat reported nominal hourly labor costs rose 2.2% year-on-year in the last quarter of 2009.
The British pound strengthened to a near three-week high vs. the dollar after better than expected UK employment data. Data from the Office for National Statistics showed the number of people claiming jobless benefits fell by 32,000 in February, the largest decline since 1997. The pound also found support from the Bank of England's minutes showing policymakers unanimously voted to keep monetary policy unchanged this month.
The Japanese yen remains little changed against the dollar after the Bank of Japan loosened monetary policies. In a split vote, the BOJ doubled the scale of the money supply tools it adopted in December, aimed at curbing a yen rise.
The Canadian dollar rose to a 20-month high vs. the US dollar after better than expected economic data and a rally in oil prices. Statistics Canada reported wholesale trade jumped by 3% in January, providing more proof that the recovery is well underway.
The Australian and New Zealand dollars rallied as oil prices rose, and investors were less averse to riskier assets. Oil topped $82 a barrel as the greenback took a beating after the Fed's announcement yesterday. The Aussie and the Kiwi push also came from optimistic market players partaking in selling the US dollar and diversifying into riskier assets like the Aussie and the Kiwi.
10-Year Treasury Note Yield: 3.646%
Dow Jones Industrial Average: 10,726.79 + 40.81