The Dollar edged lower against Euro and Yen on Tuesday, its second straight daily decline, after a bigger-than-expected quarterly loss at Fannie Mae suggested more financial market turmoil ahead. Fannie Mae posted a $2.19B loss in the first quarter as the housing market took a turn for the worse. Analysts said that was worrisome for the Dollar because it suggested problems in the troubled US housing sector have yet to work their way through the economy. Should those problems lead to more job losses and slower consumer spending, the Federal Reserve may be forced to cut interest rates again, dulling the dollar's appeal to global investors.
EurUsd was fairly unchanged at 1.5519. The Euro drew support from euro zone service sector data that was slightly stronger than expected. UsdJpy edged down 0.11% to 104.80. UsdChf was unchanged at 1.0525. GbpUsd went 0.12% lower at 1.9714 after hitting 1.9636 intraday low. UsdCad fell 0.93% to 1.0021. Traders said oil's surge to a fresh record above $122 a barrel was boosting the Canadian currency.
Record high oil prices were seen reinforcing the European Central Bank's focus on inflation, which bank President Jean-Claude Trichet on Monday termed a significant risk. This underlined expectations that the ECB would keep rates at 4% when it meets on Thursday. Analysts expected the ECB to stick with its hawkish line on inflation in Trichet's post-meeting briefing on Thursday, despite a recent run of soft data.
AudUsd rose 0.37% to 0.9496, having retreated from a two-week high after the Reserve Bank of Australia held its key cash rate at a 12-year high of 7.25%.