Dollar fell against euro to fresh 2009 low on improving risk tolerance. The greenback extended recent decline against a basket of currencies to this year low as more data showed the global economy is on the path to recovery. The dollar index weakened to its lowest level at 78.33 since December even U.S. Treasury Secretary Timothy Geithner committed to keeping the U.S. currency strong and inflation low and stable
Although U.K. posted a much stronger-than-expected construction PMI index (45.9 in May vs 38.1 in April), the British pound pared some of its gains from Monday against the greenback and hit intra-day low of 1.6324 in European morning session on news that Abu Dhabi's Sheikh Mansour sold its stake in Barclays (fell 13.52%). However, the sterling found good buying interest on dips and back on its uptrend in U.S. session after U.S. pending home sales M/M in April came out at 6.7%, which was much better than the forecast of 0.5% and 3.2% in March. This upbeat data sent the cable to the seven-month high of 1.6595 before New York closed.
In European morning trade, the euro retreated to as low as 1.4102 against the dollar in tandem with the cable. Although the unemployment rate in eurozone rose to 9.2% in April from 8.9% in March, investors still stayed their focus on the recent global economy story and demanded for higher-yielding assets. Euro continued to trade with a firm undertone against the dollar and it touched the other fresh 2009 high at 1.4332 in late New York afternoon.
As the optimism that the worst of recession is over, investors started to accumulate Japanese yen carry trades again. Eur/jpy touched multi-month high at 137.45, aud/jpy hit the highest rate at 78.85 since early October while gpb/jpy formed the fresh 2009 high at 159.22.
Earlier in the day, Reserve Bank of Australia announced to leave its official rate unchanged at 3.00% and the aussie briefly and strongly slipped to 0.8050 versus the greenback. However, investors continued to be optimism from the stronger-than-expected manufacturing PMI data from China, German, eurozone, U.K., and U.S. posted on Monday, hence, they are hunger for assets with higher returns.
Data to be released on Wednesday includes Australia GDP, German, eurozone, U.K. service PMI, U.K. nationwide consumer confidence, Halifax house prices, eurozone GDP and PPI, U.S. ADP employment, durable goods orders, factory orders, ISM non-manufacturing index and Fed’s Bernanke will testify about U.S. economy.