The dollar surged against its counterparts as the Federal Reserve increased the discount rate for banks to 0.75 percent from 0.50 percent, indicating improvement in financial market conditions.
Against the Japanese yen, the greenback retreated from 91.39 in Thursday's Australia trading session and extended the decline in Asia on speculation Japanese exporters and corporations took advantage of yen's weakness and bought the currency. As BoJ kept its benchmark interest rate close to zero at 0.1% as expected and maintained its monthly debt repurchase level while resisting government pressure to take further action to counter deflation, the pair fell further and hit an intra-day low of 90.56 at NY opening following the release of larger-than-expected U.S. jobless claims and PPI data. The dollar, however, staged a rebound in U.S. morning on active cross-inspired selling in the yen (eur/jpy jumped from an intra-day low of 122.76 to 123.99). The pair then extended the rally and hit an intra-day high of 91.82 in Australia on the rise of the discount rate. On other news, U.S. leading indicators rose by less-than-expected 0.3% in January versus economists' forecast of 0.5% increase from upwardly revised 1.2% rise in December. The U.S. Philadelphia Fed business conditions index advanced to 17.6 in February (forecast was 17.0) from 15.2 in Jan.
Although euro extended Wednesday's decline against the greenback in Asia and reached as low as 1.3539 at European opening on speculation European lenders may need more short-term funding from central banks amid Greece's fiscal crisis, the pair rebounded as a report showed that overnight borrowing from the European Central Bank fell sharply to 52 million euros after almost a week exceeding 3 billion euros, easing concerns about potential banking troubles. The single currency picked up more upward momentum after the release of weaker-than-expected U.S. jobless claims and PPI data which came in at 473k versus the consensus forecast of 430k from the revised previous reading of 442k and 1.4% m/m compared to economists' forecast of 0.8% m/m respectively.
Euro hit an intra-day high of 1.3655 against the dollar in U.S. morning on speculation the Swiss National Bank sold the Swiss franc in an effort to cap the currency's gains (eur/chf rose from 1.4645 low to 1.4690 high). The pair, however, then retreated as traders saw no signs of official buying and the single currency tumbled to as low as 1.3490 in Australia as Fed raised the discount rate.
Cable declined in tandem with euro and fell to as low as 1.5556 in European afternoon after the release of larger-than-expected January U.K. public borrowing which came in at 4.339 billion pounds versus the consensus forecast of -2.8 billion pounds and the previous reading of -5.27 billion pounds, the first January deficit since records began in 1993, although U.K. CBI order in January was -36.0, the highest since December 2008. The pair then followed euro's rebound and hit an intra-day high of 1.5688 in NY morning. However, cable lost the gain and fell to an intra-day low of 1.5532 in Australia on the rise of the US discount rate.
Economic data to be released on Friday include Japan BOJ report, Germany PPI, PMI manufacturing, PMI service, EU PMI manufacturing, PMI service, current account, U.K. retail sales, U.S. CPI, CPI core, real earnings, Canada leading indicators and retail sales.