The Dollar posted gains on Thursday, as investors felt more confident about the outlook for the troubled financial sector, with US companies' earnings so far generally revealing no major negative surprises. It also got a lift against the Euro earlier after a euro zone official said the recent appreciation in the European single currency was undesirable. EurUsd set record high just near 1.6000.
Dollar had some support form US equities, with the companies reporting earnings on Thursday showing mixed results. Investors reacted positively to Merrill Lynch after it reported sub-prime mortgage write-downs of $6.5bio, as analysts' expectations. However, optimism was offset by cautious outlooks from eBay and United Technologies Corp.
Yesterday at close, EurUsd fell 0.21% at 1.5906. UsdJpy was up 0.54% at 102.38 and UsdChf rose 0.61% to 1.0056. GbpUsd rose 0.9% to 1.9898 after a UK Treasury source said authorities could announce as early as next week details of a plan to ease tight conditions in the British mortgage market.
Also, a sharp fall in the Philadelphia Fed's business index for April briefly trimmed some dollar gains, but investors resumed buying the Dollar against majors after Dallas Fed President Richard Fisher indicated a reluctance to cut US interest rates. Fisher said an accommodative monetary policy could cause inflation and it is important for the Fed to have a steady hand, and not to cut rate too fast.
The Fed is still widely expected at its end of April meeting to lower the benchmark federal funds rate target from its current level of 2.25% to support an economy struggling under the weight of deep housing and credit crises. That would be in addition to 300bp of cuts done since September. This was in contrast to the European Central Bank, which has left rates at 4% for more than a year to fight record high euro-zone inflation.