The US dollar strengthened vs. most major currencies as weak economic data kept investors risk averse. The University of Michigan Confidence report came in higher than expected at 61.9. San Francisco Federal Reserve President Janet Yellen said signs of improvement in recent US data did not mean the economy was out of the woods. The Dallas Fed President Richard Fisher said that Fed policies to unlock credit markets should accelerate recovery, but also said that the economy was in a “bone-crushing” recession. Citigroup reported a smaller-than-expected first quarter loss that was better than analyst forecasts.
The euro fell against the dollar after a speech by European Central Bank President Jean-Claude Trichet in Tokyo signaled further interest rate cuts and alternative steps to improve the economy. Trichet said that the central bank would unveil alternative financing measures next month and is ready to cut interest rates again. Trichet also added that saying the euro was weak did not reflect that the currency is higher than when it first launched a decade ago.
Sterling fell against the dollar as risk-aversion drew investors to the dollar.
British Trade and Investment Minister Mervyn Davies said that he is not worried about the weakening of the pound as it will help drive the British economy out of recession. A slide in the currency helps the competitiveness of UK exports.
The Japanese yen maintained its firmness against the dollar as uncertainty about the prospects for global economic recovery helped the risk-averse currency.
The Canadian dollar slid slightly against the US dollar this morning amid falling gold prices and expectations that the Bank of Canada may need to pursue alternative measures beyond interest rate cuts to lift Canada’s worsening economy. The BoC will announce its decision for interest rates on Tuesday of next week with most expecting no change and looking for any hint that the central bank’s future plans will employ credit or quantitative easing policies. This uncertainty has weighed on the currency despite promising domestic inflation data out of Canada that showed the annual inflation rate falling to 1.2% in March after hitting 1.4% in February.
The Australian dollar remained flat this morning as concerns begin to resurface about the global economy. However, the currency has still managed to post a gain for the seventh consecutive week. The New Zealand dollar fell this morning against the US dollar, settling near two week lows amid ongoing uncertainty over the economy at home and abroad. Many currency investors are still concerned with the varying economic data surfacing around the world and are hesitant to pick up higher-yielding currencies like the kiwi.
