The greenback fell across the board on Thursday as improved weekly job and retail sales data boosted hopes of an economic recovery and encouraged investors to in search of assets with higher yields. In addition, the dollar extended losses versus a basket of currencies after the strong demand for 30-year U.S. government bonds.
The British pound formed an intra-day low of 1.3645 against the dollar in Asian. The cable rose after the release of Bank of England inflation attitudes survey which showed British inflation expectations for the coming year rose to 2.4% in May from 2.1% in February (first rise since August '08). However, the sterling initially retreated after U.S. posted the better-than-expected weekly jobless data (601,000 versus the readings of 625,000 from previous week) and the improved retail sales came in at 0.5% in May compared to –0.2% in April. The British pound rebounded strongly on dips and accelerated its gain against the greenback as high demand for the U.S. long-term debt auction further diminished the allure of the U.S. currency as a safe-haven. The sterling touched as high as 1.6622 against the greenback in New York afternoon before easing. Cross buying versus euro and yen also lifted the British pound with eur/gbp dropping to this year low of 0.8500 while gbp/jpy rallying to multi-month high of 162.07.
Although euro dropped to an intra-day low of 1.3943 against the dollar initially after the release of U.S. jobless claims and retail sales data, the single currency rallied from there on prospect for a U.S. economic rebound. Similar to the British pound, euro accelerated its gains versus the dollar after the strong demand for the U.S. long dated bonds auction as the result encouraged investors to be more risk-aggressive and buying in higher-yield assets. Euro hit as high as 1.4178 against the greenback before retreating partly due to profit-taking purposes.
Earlier in the day, Reserve Bank of New Zealand kept the official cash rate at 2.50% unchanged. Kiwi dollar rallied to 0.6474 against the greenback in New York afternoon. Australia posted a much better-than-expected unemployment change (-1,700 in May compared to forecast of –30,000). Aussie dollar jumped to as high as 0.8238 against the U.S. currency in New York session. The surge in oil prices (crude oil futures closed up 1.89% to $72.68/barrel) supported loonie where usd/cad touched an intra-day low of 1.0948 before rebounding due to shorting-covering.
Data to be released on Friday include Japan capacity utilization, industrial production, consumer confidence, eurozone industrial production, U.S. University of Michigan survey.