The US dollar weakened across the board today as risk appetite returned. With no significant US economic data out today, the dollar traded primarily on risk sentiment and the strength of other currencies. Positive economic data in Germany, France, and the UK helped the euro to appreciate the euro and pound against the greenback; however, disappointing Canadian employment data relieved the dollar from falling to parity against the loonie. On the data front next week, investors will be expecting the release of Monthly Budget Statement for the month, Trade Balance for Februrary, and Retail Sales data for March.
The euro strengthened against the dollar today as German Trade Balance improved in Feburary, rising to 12.1 billion vs the forecasted 11.4 billion euros. The gain was largely supported by increasing exports of 5.1% in Februrary vs the decrease of 6.3% of the previous month. After ECB President, Jean Claude Trichet reiterated his assessment of a stable economic recovery and reaffirmed his support for the EU plan agreed upon in March, the euro recovered from almost a 1 year low against the US dollar, appreciating close to 0.80% today. Despite today's gains, the euro should remain under continued pressure in the near term as the Greece crisis continues.
The British pound extended further gains against the euro after producer prices rose at an impressive rate of 3.6% in March vs. the previous 0.1%. Furthermore, house prices rose as the nation's GDP expanded 0.4% in the first quarter. The pound climbed 2.65% against the euro for 10 consecutive days, the longest run since January 2007. Positive economic data provided some relief for the pound as the uncertainty of UK's election continues to weigh on the nation's currency.
The Japanese yen softened slightly on speculation that Greece will receive a bailout package to avoid a default. This reduced demand for the yen as a safe haven currency. Meanwhile, Bank of Japan Governor Masaaki Shirakawa and BOJ Deputy Governor Hirohide Yamaguchi said the government will continue to work with the central bank to end deflation.
The Canadian dollar fell from parity against the greenback after a Canadian report posted weaker-than-expected employment figures for March. Net change in employment fell to 179,000 vs the previous 209,000 and the forecasted 260,000. The disappointing data coupled with a stalled unemployment rate of 8.2% prevented the loonie from surpassing the significant parity level against the dollar. With little economic data on the calendar next week, the loonie will be trading largely on the strength of commodities, specifically crude oil.
The Australian dollar continued to rally and was supported by rising interest rates in its country amid an expanding domestic economy and growth in Asia. The Reserve Bank of Australia lifted its key cash rate by 25 basis points to 4.25 percent on April 6 for the fifth time in six meetings and hinted at more rate hikes down the road. Australia's high yield advantage and its healthy labor market will continue to support the currency. The New Zealand dollar also rallied as risk appetite for higher-yielding assets rebounded as concern that Greece will default on its debt lessened.
10-Year Treasury Note Yield: 3.9102%
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