The euro moved higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2760 level and was supported around the $1.2525 level. The common currency snapped back after being given earlier in the week on escalating concerns about Eastern European and Western European banks’ exposure to asset problems in that region. Austria’s central bank said the most important Austrian banks are well-capitalized with sufficient liquidity and can contend with problems in Eastern Europe. Many traders believe these latest developments in Eastern Europe are another reason why the European Central Bank will ease interest rates next month. In U.S. news, the January headline producer price index rose 0.8% m/m, reversing some of December’s 1.9% decline, while the core PPI was up 0.4%, beating expectations of a 0.1% climb. Core PPI was also up 4.2% y/y. These data allayed some concerns that deflationary pressures were mounting in the U.S. though it is premature to conclude downward price pressures are stabilizing. Other data released today saw weekly initial jobless claims remain steady at a revised 627,000 while continuing jobless claims jumped higher to 4.987 million, the highest level in 42 years. Additionally, it was reported that the Philadelphia Fed’s manufacturing survey printed at -41.3 in February and that the U.S. January leading index gained 0.4%. Dealers are paying close attention to the Obama administration’s plans to slow the foreclosures crisis in the U.S. with many traders concluding the plans amounts to moral hazard. Euro bids are cited around the US$ 1.2475 level.
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