Euro advanced slightly against the dollar as a rise in global stock markets and an upbeat U.S. manufacturing data boosted risk appetite and dented dollar’s safe-haven appeal. A report showed manufacturing in the U.S. Mid-Atlantic region expanded in August for the first time in ten months, boosting optimism about recent recovery and provided further evidence that the recession has passed. This encouraging data offset the negative news that an increase of 15,000 U.S. workers filed first-time jobless claims last week to a seasonally adjusted 576,000. In addition, the index of leading economic indicators, which is supposed to forecast economic trends 6-9 months ahead, rose for a fourth straight month in July. The greenback rebounded from an intra-day low at 93.85 against the Japanese yen after the jobless claims data and retreated again before stabilising.
During Asian and European sessions, euro traded sideways against the dollar on Wednesday. Although the single currency fell to 1.4200 in New York morning, the pair found buying interest on dips and rose to an intra-day high of 1.4277 as U.S. shared extended its three-day gains and erased all of the 186-point losses on Monday. Cross buying in euro also helped to lifted the single currency as eur/gbp rebounded strongly from 0.8573 to 0.8643 while eur/jpy also bounced from 133.41 to 134.35/40. DJI closed up 70.89 points or 0.76% along with Nasdaq and S&P advanced more than 1%.
The British pound turned lower against the dollar to 1.6451 on Thursday as U.K. posted a record budget deficit for July, sparking concerns about the country may have to sell more debt to shore up its finances. The Office for National Statistic said the budget shortfall was 8 billion pounds, the largest for July since records began in 1993. A widening deficit increases the likelihood that U.K. will be forced to boost debt. Bank of England Governor Mervyn King and two of his colleagues were overruled in a push to expand the bank’s program by 75 billion pounds to 200 billion pounds stated on the minutes of their Aug. 6 meeting published on Wednesday showed. Initially, the pound rose to as high as 1.6611 after U.K. retail sales data came out at 0.4% compared to economists forecast of 0.2%. Cable was able to recover some losses in New York morning as the strength in U.S. stocks increased demand for higher-yielding assets.
Elsewhere in the markets, Canadian dollar rose to its highest level in about a week as Goldman Sachs Group Inc. recommended buying loonie. The firm stated in a research note that U.S. fundamentals will not improve sufficiently this year to support broad strong U.S. currency and the Canadian dollar is particularly attractive given its exposure to oil.
Data to be released on Friday include German and eurozone PMI service and manufacturing and U.S. existing home sales. Fed’s Chairman Ben Bernanke will make a speech at 14:00GMT.