The greenback rose broadly against major currencies after the release of U.S. retail sales excluding autos, which increased by 0.5% in April, much higher than the expectation of a rise of 0.2% together with the upwardly revised 0.4% increase in March. The data added speculation the Federal Reserve will stop cutting borrowing costs on June 25.
Interest-rate futures showed a 94% chance the Fed will hold its target lending rate at 2% at its next meeting, compared with 86% odds on Monday. Cleveland Fed President Sandra Pianalto cited the risk of inflation. Fed Chairman Ben S. Bernanke said that financial markets remain unsettled and the central bank will increase its auctions of cash to banks as needed. San Francisco Federal Reserve Bank President Janet Yellen said the current level of U.S. interest rates should boost the economy in the second half of the year.
The U.S. currency appreciated against the Japanese yen and Swiss franc from 103.39 to 104.93 and from 1.0419 to 1.0557 respectively. Australian dollar and New Zealand dollar weakened against U.S. currency from 0.9477 to 0.9386 and from 0.7711 to 0.7636 respectively.
The British pound tumbled from 1.9590 to three-month low of 1.9418 as the house prices of London's property market declines last month in at least 14 years, while inflation in April was the highest since 2002. The Bank of England held its target lending rate at 5 percent on May 8.
European Central Bank council member Christian Noyer said that some Asian and Middle Eastern governments pose an ‘unstable and dangerous’ inflation threat to the world economy by linking their currencies to the dollar. The single currency retreated from 1.5566 to 1.5430 on dollar’s broad-based strength.
Wednesday will see the release of Japan's domestic CGPI, trade balance and current account, U.S. average earnings, U.K. claimant count and ILO unemployment rate, eurozone industrial orders, U.S. CPI and real earnings.