The US dollar strengthened vs. most major currencies on risk aversion as investors await the G8 summit and US corporate earnings. Doubts over an economic recovery after last week's grim US jobs data, have continued to boost safe-haven currencies such as the dollar and yen. Positive data from the Mortgage Bankers Association showed that mortgage applications were up 10.8%. News that Chinese President Hu Jintao is returning early from the G8 summit, to deal with unrest in the Xinjiang region of China, has dampened speculation of comments for a new reserve currency.
The euro fell against the dollar as investor's risk aversion continued. Data in Germany, the Euro Zone's largest economy, showed that industrial output rose by 3.7%, the fastest pace in nearly 16 years in May. The Bank of France revised its forecasts for the French economy to shrink by 0.4% in the second quarter, from a decline of 0.5%. Positive data from the Euro Zone was unable to encourage investors to buy the euro as broader concerns of an economic recovery remain.
The British pound hit a one-month low against the dollar as investors brush off economic data to await the Bank of England's policy decision. Data showed that house prices fell 0.5% in June, slightly better than forecasts of a 0.7% fall. British consumer confidence rose to 58 in June, almost reaching last year's pre-crisis reading of 59. Despite these figures, investors were still focused on yesterday's 0.5% monthly fall in factory output.
The Japanese yen strengthened against the dollar as investors poured into the safe-haven currency. Domestic data showed corporate bankruptcies rose 7.4% in June from a year earlier. Core private-sector machinery orders fell 3.0% in May from the previous month. Orders from non-manufacturers fell 6.9% from the previous month although manufacturers increased orders by 5.4%.
The Canadian dollar weakened against the dollar as prices for crude oil and gold, key Canadian exports, continue to fall.
The Australian and New Zealand dollar both fell against the dollar on signs that an economic recovery was struggling to gain traction in Asia. The Reserve Bank of Australia kept interest rates at a record low of 3% at its monthly policy meeting on Tuesday, with hope for an economic rebound. Investors may price in rate cuts if Australia's official jobs report on Thursday show a bigger-than-expected unemployment rate above forecasts of 5.9%.
10-Year Treasury Note Yield: 3.407%
Dow Jones Industrial Average: 8,134.73 -28.87