The greenback weakened broadly against major currencies on Tuesday after Fannie Mae, the biggest financier of U.S. home loans, reported a larger-than-expected $2.19 billion loss and crude oil prices surged to fresh record high of $122.73 per a barrel. In addition, the number of Americans who signed contracts to buy previously-owned homes declined in March.
Fannie Mae said its credit-market losses will be worse next year than in 2008. The Washington-based company and its smaller rival Freddie Mac may each need as much as $15 billion in capital to cope with delinquencies and foreclosures.
The single currency rose versus the dollar from 1.5452 to 1.5595 as a European Union report that showed producer-price inflation accelerated more than forecast in March, increasing pressure on the European Central Bank to keep interest rates on hold. The greenback weakened against the Japanese yen from 105.13 to 104.02 and then closed at 104.77 due to renewed cross selling in jpy on the rebound in U.S. stocks. Dow Jones industrial average fell initially by more than 100 points and then closed up by 51 points to 13,020.
The British pound fell briefly to 1.9635 on the weak U.K. services PMI data and then rebounded strongly to 1.9774 on dollar’s broad-based weakness. The greenback declined versus the Swiss franc from 1.0551 to 1.0428 before rebounding on cross selling in chf to 1.0521.
Australian dollar rose against the U.S. currency from 0.9432 to 0.9506 as the Reserve Bank of Australia held its key cash rate at a 12-year high of 7.25% and underlined its concern about inflation and demand. New Zealand dollar also strengthened versus U.S. currency from 0.7846 to 0.7937. The greenback fell against Canadian dollar from 1.0147 to 0.9999 after the release of better-than-expected Ivey PMI data, which came in at 57.6 in April (forecast was 54.5) from 59.0 in March.
Wednesday will see the release of U.K. Nationwide consumer confidence, industrial and manufacturing production, eurozone retail sales, German factory sales, U.S. labour cost, productivity and pending home sales.