The U.S. dollar and Japanese yen rose against European currencies on Friday as equity markets tumbled due to the weak U.S. confidence index. The University of Michigan preliminary index of consumer sentiment fell this month to a reading of 63.2, compared with the median forecast of economists for a rise to 68.5. Previously, the U.S. consumer price index was flat last month (-2.1% versus -2.0% y/y and 0.0% m/m which is the same as forecast).
EUR/USD traded sideways in Asia and European morning, then rebounded to 1.4307 ahead of U.S. opening. However, price later tumbled after the release of the weak U.S. data, hitting an intra-day low of 1.4160 and closed at 1.4196, nearly unchanged for this week. On crosses, euro fell against the yen by the most in almost three weeks to as low as 134.20 before recovery; EUR/CHF also weakened to 1.5221, as the slightly weaker-than-expected HICP data added concern that the 16-nation region will lag behind in a recovery of the global economy.
The British pound dropped to as low as 1.6485 against the dollar, making a second week of losses on speculation that reports in next week will add to signs the recession in U.K. has further to run. The Britain’s currency also made its biggest weekly drop against the euro since April (weakened to as low as 0.8655 before recovery in late NY session).
The Japanese yen gain against its main counterparts due to losses in U.S. equities, DJI dropped 76.79 points to 9321 level while S&P 500 and NASDAQ closed at 1985 and 1004 respectively. The yen strengthened against aussie and sterling to as high as 78.43 and 156.05 respectively in late NY session. The yen's gains were also partly attributed to potential fund repatriation by Japanese investors related to some $57.5 billion in redemptions and coupon payments on U.S. Treasuries next week.
High-yielding currencies weakened sharply on risk aversion and drop in crude oil (which fell $2.86 to $67.66 level). The Australian dollar hit an 11-month high against the U.S. dollar at $0.8479 earlier in the day but tumbled to as low as 0.8275 in NY afternoon. The loonie fell from 1.0814 to 1.1025 versus the greenback while the kiwi retreated from its 10-month high of 0.6888 made in Europe and ended at 0.6773.
Economic data to be released next week include:
Monday - Rightmove house prices in U.K.; GDP in Japan; Retail sales in Switzerland; Trade balance in Eurozone n; Empire state manufacturing index and NAHB housing market index in U.S.
Tuesday – Leading indicators in Japan; CPI and RPI in U.K.; ZEW index in Germany and Eurozone; Building permits, housing starts and PPI in U.S.
Wednesday – Westpac leading economic index in Australia; All industry index and Machine tools order in Japan; PPI in Germany; Current account in Eurozone; CBI industrial trend index and BOE meeting minutes in U.K.; CPI and leading indicators in Canada.
Thurday – Trade balance and ZEW index in Switzerland; PSNCR and retail sales in U.K.; Wholesale sales in Canada; Jobless claims, leading indicators and Philadelphia Fed survey in U.S.
Friday – PMI service and manufacturing in Germany and Eurozone; Existing home sales in U.S.