The greenback rose broadly against major currencies on speculation the Federal Reserve will stop reducing borrowing costs. The single currency fell to 5-week low of 1.5430 against the dollar on Thursday.
U.S. currency extended its gain versus the euro after a report from the Institute for Supply Management showed U.S. manufacturing index in April came in at 48.6, better than the expectation of 48.0. Interest-rate futures showed an 82% chance policy makers will keep the fed funds target unchanged when they next meet June 25 after the Fed cut interest rate by 25 basis points to 2.00% on Wednesday from 2.25%. U.S. dollar rebounded against the Japanese yen from 103.54 to 104.60 and rallied versus Swiss franc from 1.0336 to 1.0509.
The Bank of England said in its twice-yearly financial stability report that ‘risk appetite will return gradually’ in the coming months, suggesting the worst of the credit crisis in the U.K. may be over. The British pound rose briefly to 1.9910 and then tumbled to 1.9712 on dollar’s broad-based strength. The single currency weakened against the sterling to 0.7800, the lowest since March 26.
Australian dollar and New Zealand dollar fell against the U.S. currency from 0.9443 to 0.9307 and from 0.7839 to 0.7738 respectively. The greenback rallied against the Canadian dollar from 1.0064 to 1.0240 on speculation the Bank of Canada will continue to cut its target lending rate from 3% on weakening economy.
Friday will see the release of German retail sales, U.K. Halifax, eurozone and German manufacturing PMI respectively, U.S. non-farm payrolls, unemployment rate, factory orders and revised durable goods orders.