The US dollar strengthened as a weaker tone in equity markets worldwide added to the greenback's allure as a safe-haven destination. A government report showing US consumer prices fell 0.1 percent unexpectedly in March also added to gains in the dollar as analysts say the data reinforces fears of deflation in the US economy. Yesterday’s weaker-than-expected US retail sales data, showing a decrease of 1.1 percent, casted a shadow over prospects for a global economic recovery, prompting investors to seek out safe-haven currencies like the greenback and yen.
The euro fell against the US dollar after comments from the European Central Bank Governing Council member Axel Weber that the central bank will announce a package of "non-standard measures" in May. These measures will be valid for the rest of this year and into next year, though Weber noted that there was "no prominent deflation risk" in the region. The euro is also being pressured with the weaker tone in equity markets and the return of risk aversion to the market.
Sterling climbed against the US dollar, breaking the key $1.50 level and hitting a 6-week high against the euro after some UK housing data raised expectations of recovery. The RICS (Royal Institution of Chartered Surveyors) monthly property survey reported its seasonally adjusted house price balance rose to -73.1 in March from -78.1 in February. The news indicate tentative signs of improvement in the UK housing markets as it is higher than it was 12 months ago, pushing the pound higher.
The Japanese yen steadied against the US dollar and extended its gains against all of the world’s major currencies as reports showed US retail sales and producer prices unexpectedly decreased in March, adding to demand for safety.
The yen is once again continuing to benefit from safe-haven flows amid risk aversion in the market.
The Canadian dollar rose to an eleven week high against the US dollar amid indications the global slowdown may be moderating. The loonie also received a boost as US Federal Reserve Chairman Ben S. Bernanke said in Atlanta that there are signs the “sharp decline” in the US economy is slowing. The Canadian currency briefly pared gains as US stocks and crude oil declined after a government report showed US retail sales unexpectedly decreased in March, as it tends to track fluctuations in stocks and commodity prices.
The Australian dollar fell to one-week lows as concerns mount over the upcoming earnings season that is expected to show firms are still struggling with the global recession. Worries over these negative results yanked the Aussie further from six-month peaks. The New Zealand dollar also fell as weaker global stock markets and poor US economic data prompted flows out of risky higher-yielding currencies. The diminished risk appetite and sliding US equities is encouraging investors to sell off growth-sensitive currencies like the kiwi.
