The U.S. dollar continues its free fall against the majors, falling over 1% against the yen and to fresh 2-month lows against the euro and pound. Weak U.S. producer price, Philly Fed and manufacturing data released today was the impetus for the losses, as markets worried about the strength of U.S. economic recovery.
Data showing a third straight monthly decline in producer prices came a day after Federal Reserve meeting minutes showed policymakers think they may need to do more to boost the economy if a sputtering recovery slows any further. This gives additional reason for traders to sell the dollar.
The euro is the surprising darling of the market today, soaring to fresh highs despite the underlying concerns over debt levels in several euro zone countries. The USD is under such pressure from its economic woes, that a breech of the 1.30 level is not out of the picture in the very near term.
The sterling extended gains to a fresh 10-week high as data released from the US kept pressure on the dollar. Market reaction was limited as Bank of England policymaker David Miles said it was not appropriate to raise interest rates now.
Invariably linked to its trading partner to the south, the Canadian dollar has showed lackluster performance today due to the USD's downturn. Even higher oil prices could not push the loonie higher. The next key Canadian-driven event for the market will be the Bank of Canada's interest rate announcement on July 20, and market expectations are leaning toward a rate increase.
Amidst current market turmoil, the Japanese yen has remained firm and strengthened against the USD and EUR. Bank of Japan Governor Masaaki Shirakawa said he was continuing to watch currency and stock price moves carefully. Earlier, the central bank raised its economic forecast for the fiscal year, but maintained a cautious view on an outlook clouded by deflation and anxiety over Europe's debt woes. Some analysts say the government, its hands tied on fiscal policy, may lean on the BOJ if sharp gains in the yen threaten a fragile recovery.
The Australian and New Zealand traded lower with investors leery of buying more risky assets after data showed China's economy was not growing as fast as some would like it to, combined with the turmoil in the US. The Aussie fell from 2-month highs reached earlier in the week. Kiwi investors await second quarter inflation figures on Friday. Expectations for a 25 basis-point hike on July 29 when the Bank of New Zealand meets are steadily increasing.
10-Year Treasury Note Yield: 2.987%Dow Jones Industrial Average: 10,287.11 -79.61
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.