In European morning, the greenback fell against the euro on comments from Russian Central Bank’s first deputy chairman, Alexei Ulyukayev. However, the U.S. currency recovered the losses after the government sold $19 billion in 10-year notes. Although the yields increased as much as 0.13% to 3.99%, the auction result eased the fears about the U.S.’s ability to finance its rescue plans and the expanding budget deficit by selling long-term debt. In addition, in late New York afternoon, Richmond Federal Reserve Jeffrey Lacker said that the high yields in U.S. Treasuries reflect investors are optimism on the present recovery and views that the Fed could higher rates sooner than expected. Furthermore, The Fed’s Beige Book reported that U.S. economic conditions were weak or got worse through May but some areas of the country saw signs the contraction was moderating.
Euro rose to intra-day high of 1.4145 after Ulyukayev said that Russia, the fifth largest holder of U.S. government debt, may diversify some of its reverses from U.S. Treasuries to International Monetary Fund bonds. However, the single currency tumbled in New York afternoon after the upbeat Beige Book report to 1.3914 before rebounding partly due to short-covering.
The British pound rose against the dollar after it released better-than-expected industrial production (0.3% in April versus the readings of –0.6% in May) and manufacturing production (0.2% in April compared to forecast of 0.0%). However, cable dropped again after dovish comments from BoE’s Barker said that rates could stay low for some time. Although some areas of the economy are starting to turn up slightly, continuous recovery is needed to firmer the view, she stated. In late New York session, the sterling tumbled to an intra-day low of 1.6241 after the U.S. Treasury auction and Beige Book report as this gave hope to investors that the Fed could higher rates by the end of this year.
Data to be released on Thursday include Japan GDP, Australia unemployment rate, German WPI, U.S. Jobless claims, retail sales, business inventories and Canada capacity utilisation.