The US dollar steadied near 7-month highs against the yen and was supported versus other currencies after strong readings from the US services sector and housing market on Monday -- following a solid jobs report late last week -- reinforced the view that the US economy is improving. US data showed the economy's vast services sector grew last month at its fastest pace since mid-2006, adding to optimism ignited by Friday's payrolls report, which showed employers added jobs in March at the fastest clip in three years. All this is likely to add to the markets' view that the Federal Reserve will raise rate before some of its major counterparts.
The euro fell broadly on renewed concerns over Greece's deficit problems. Media reports said Greece wanted to bypass an International Monetary Fund financial contribution as part of an EU deal struck last month and that Greek banks were being hit as big depositors move cash overseas. The news prompted traders to dump the European currency. Additional negative news about Greece should continue to pressure the euro.
Sterling fell against the US dollar and the euro as mixed UK opinion polls took the fuel off its recent rally. Political uncertainty returned to the forefront, with Prime Minister Gordon Brown calling a national election on May 6. Fears the vote could leave no party in overall control, potentially making it difficult to tackle the UK's deficit, continue to weigh on sterling. The threat of a hung parliament -- where no party has an overall majority -- has helped knock sterling down almost 10 percent versus the greenback this year as investors worry about a weak government's ability to tackle the UK's public finances.
The Japanese yen held near 7-month low against the US dollar, supported by a surge in US Treasury yields. The US data showing strong readings from the US services sector and housing market on Monday, along with speculation for an earlier interest rate hike in the US are helping push the yen lower.
The Canadian dollar rose to one-for-one footing with the US currency, hitting its strongest level since July 2008, boosted by rising commodity prices and expectations for higher domestic interest rates. Canadian economic fundamentals and an improving international economic outlook have provided support for the Canadian dollar as a string of stronger-than-expected data raised expectations for higher interest rates. Given this, the Canadian currency should remain hovering around parity in the short term.
The Australian dollar rallied, nearing a 2-1/2 month high after the Reserve Bank of Australia raised interest rates by 25 basis points to 4.25 percent and suggested more tightening was to come. A rise above $0.9253 would mark the Australian dollar's strongest since late January. The currency should remain supported as investors price in more rate rises to come. The New Zealand dollar fell to a nine-year low against the Australian dollar and also dipped on the US dollar, as a rise in Australian interest rates highlighted the differing fortunes of the neighboring economies. In contrast, a closely-watched survey showed a dip in New Zealand business confidence, underlining the cautious nature of the recovery and pointing to the central bank remaining on hold for rate hikes until at least the middle of the year.
10-Year Treasury Note Yield: 3.954%
Dow Jones Industrial Average: 10,959.11 + 14.51