The dollar was widely mixed in early afternoon trading Monday in New York, moving to a multi-week high against the euro, while coming under considerable pressure against the yen, falling to its lowest level in nearly three weeks. Meanwhile, against the pound, the buck pushed higher, moving to its highest level since early April.
Traders considered the release of the Conference Board's index of leading of US economic indicators, which suggested continued weakness for the world's biggest economy.
Traders continued to speculate on quantitative easing measures by the European Central Bank, which is expected to cut rates early next month. Comments by ECB chief Jean-Claude Trichet have been especially closely watched for any further hints in regards to a shift in monetary policy in the European Union, which continues to struggle to find a unified and effective response to the recession.
Economic prospects in the U.K. looked mixed with a downward revision in Gross Domestic Product figures for the first quarter of 2009 but a rise in home prices for the third straight month. Meanwhile in the Far East, the governor of the Bank of Japan continued to dampen any expectations of an imminent economic recovery.
The risk-averse mood on the day was further indicated by the considerable strength in U.S. treasuries, a haven of guaranteed returns. Last week, a report on Treasury International Capital showed that foreign demand for treasuries remains strong, prompting some of the upward move seen in the dollar this year. Notably, Chinese holdings in U.S. treasuries climbed 0.6 percent for the month of February, bringing the total to $744.2 billion.
The greenback surged against the euro, posting its highest level against the currency since mid-March. The dollar posted a level of 1.2928 in the early afternoon hours, up under a penny from its overnight levels. With the advance, the dollar has extended gains posted during the course of the previous week, looking to the next resistance level at 1.2456, posted in early March.
The ECB is considering additional monetary easing measures to support the economy and Europe will see a gradual recovery in 2010 after experiencing exceptionally challenging situations in the current year, ECB President Trichet told the business daily Nikkei in an interview published on Monday.
Repeating his remarks made on the latest Governing Council meeting, Trichet told the Nikkei that the next rate cut would be very measured. On April 2, when the ECB lowered its key interest rate to a record low of 1.25 percent, the central bank chief had hinted at further easing in the bank's main interest rate. At the same time, Trichet indicated that the ECB has several good reasons to avoid lowering interest rates to zero.
Monday, the European Central Bank said the current account of the Euro area showed a deficit of EUR 93.6 billion in 2008, around 1 percent of GDP. In 2007, the current account balance had registered a surplus of EUR 11.1 billion.
Against the pound, the buck jumped to its highest level in nearly three weeks, posting a quote of 1.4547 in the early afternoon, up over two hundred pips compared to its overnight level of 1.4771. With the climb, the dollar has added to its recent gains while continuing to move away from 3-month low of 1.5068 posted early last week.
The Confederation of British Industry forecast a slow and fragile recovery in the U.K. with growth resuming only in the spring of 2010. The industry lobby revised down its GDP forecast for 2009 to a 3.9 percent contraction compared to an earlier estimate of a 3.3 percent GDP decline, reflecting a harsher sequential decline of 1.8 percent in the first quarter of 2009.
Further, the CBI predicts 0.2 percent sequential growth in the second quarter of 2010, which would be aided by aggressive monetary policy, a weaker pound, low inflation and the fiscal support measures announced by many nations.
Indicating that confidence in the U.K. housing market is recovering gradually, house prices rose for the third straight month in April and marked the biggest increase in 14 months. Sellers raised average asking prices by 1.8 percent month-on-month or GBP 3,996 to GBP 222,077 in April following the 0.9 percent increase in March, the country's largest property website Rightmove said.
The greenback plunged against the yen, moving to its lowest level in almost three weeks. Moving into the early afternoon, the buck is sitting at 97.9550, compared to its overnight quote of 99.3250. With the retreat, the dollar continues move away from a 3-month high of 101.43 posted earlier this month.
Monday, the Bank of Japan Governor Masaaki Shirakawa restated that Japan's economic and financial conditions are weakening significantly.
Speaking at an annual meeting of Japanese trust banks in Tokyo, Shirakawa said, The Japanese economy is deteriorating significantly.
Earlier this month, Japan's ruling Liberal Democratic Party approved fresh stimulus spending of 15.4 trillion yen (US$154 billion) to resuscitate the world's second-biggest economy from its deepest recession since World War II.
A report from the U.S. Conference Board released a report Monday morning showed that its leading economic index fell 0.3 percent in March following a revised 0.2 percent decrease in February. The agency noted that the index has not risen in the past nine months.
Economists had been expecting the index to fall 0.2 percent compared to the 0.4 percent decrease that had been reported for the previous month.
Negative contributions from building permits, stock prices, and the index of supplier deliveries contributed to the slightly bigger than expected decrease by the index.
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