The US dollar was broadly supported by an increase in risk aversion, rising 0.41 percent against a basket of currencies. The greenback, however, extended declines against the yen after data showed US initial jobless claims rose unexpectedly last week by 18,000 to 460,000 in the week ending April 3. The data is taking a backseat as the US dollar's major counterparts, the euro and sterling, continue to deal with a Greek debt crisis and a looming UK election.
The euro fell to near its lowest level this year against the US dollar on growing doubts about Greece's ability to tackle its debt crisis. The single currency slightly trimmed losses, though, after European Central Bank President Jean-Claude Trichet said he expects the euro zone to grow at a moderate pace in 2010, while Greece is not in danger of defaulting. However, the ECB also left rates at a record low of 1 percent which should continue to keep pressure on the euro.
Sterling hit a seven-week high against the euro as the euro continues to suffer from ongoing concerns about Greece's deficit problems, while the pound was supported by strong readings of UK output and housing data. Government figures showed a 0.5 percent month-on-month rise in UK industrial output in February, following a slide in January. Data from Halifax also showed house prices rose by 1.1 percent in March after a 1.6 percent fall in February. Despite its gains against the euro, the pound slightly weakened against the greenback and stayed on the backfoot overall as uncertainty surrounding the outcome of a looming UK election is keeping the pound under pressure.
The Japanese yen strengthened after the New York Times reported that China was close to announcing a shift in its currency policy involving a small but immediate revaluation of the yuan, which rose to its highest since October. Concerns that an appreciation in the Chinese currency would weigh on Chinese growth and diminish its demand for commodities weighed on commodity-linked currencies, creating risk aversion in the market and pushing the yen higher.
The Canadian dollar loosened its grip on parity with the US dollar, a day after nearing a 21-month high as oil prices retreated further and euro zone worries persisted. Oil slipped for a second day toward $85 a barrel, pressured by a stronger US dollar and a rise in US crude stockpiles to their highest level in nearly 10 months, weighing on Canada's commodity-linked currency.
The Australian dollar strengthened after data showed 19,600 jobs were added in March, showing the jobs market was as resilient as expected and backing the case for domestic interest rates to rise further. Unemployment was also steady at 5.3 percent, right in line with forecasts. The New Zealand dollar was little changed after being knocked lower by further evidence of the contrasting fortunes of New Zealand and Australia. The kiwi did drift slightly lower as the jump in dairy prices was eroded by solid employment data in Australia, the latest in a line of strong figures to demonstrate an Australian economy powering ahead, while New Zealand slowly recovers.
10-Year Treasury Note Yield: 3.847%
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