Despite a brief bounce to 1.4415 at Tokyo opening, the single currency tumbled after release of German & euro zone ZEW index, a gauge to show investor sentiment. German ZEW index came in much weaker than expected at 47.2 in January versus the expectation of 49.5 and well below previous reading of 50.4. The eurozone ZEW economic sentiment in January also dropped to 46.4 versus the consensus forecast of 48.0. Euro nose-dived immediatey after the data and later weakened to 1.4252 in NY mid-session (its lowest level against the greenback this year) as the weak ZEW index added to woes inflicted by flagging market confidence in Greek public finances.
Although cable has rallied to 1.6459 in European morning after the release of higher-than-expected U.K. CPI which rose by 0.6% m/m and 2.9% y/y, price later tumbled to 1.6312 in European mid-session in tandem with euro on dollar broad-based strength.
Chinese move to tighten monetary liquidity by lifting auction yields on one-year bills hurt investor risk appetite, boosting the U.S. dollar against both the yen and higher-yield commodity currencies.
Net overall capital inflows into the U.S. rebounded to $26.6 billion in November from a revised outflow of $25.4 billion in October.
Despite early marginal weakness to 90.31 versus the yen, the greenback rebounded on short-covering after Japan Airlines JAL filed for bankruptcy as expected. The pair reached intra-day high of 91.27 in NY mid-session before stabilizing.
The greenback also rose against Canadian dollar to as high as 1.0350 after the Bank of Canada held rates steady and slightly lowered its growth outlook, saying a strong currency remains a risk to recovery.
Data to be released on Wednesday include New Zealand CPI, Australia Westpac consumer confidence, Japan tertiary industry index, machine tools orders, Germany PPI, U.K. ILO unemployment rate, BOE meeting minutes, Canada CPI, U.S. building permits, housing starts, PPI.