The US dollar fell against the euro and to its weakest level in a week against a basket of currencies. Demand for the greenback fell on the easing of extreme risk aversion. Stocks were higher at the opening on Wall Street and rose in Europe, boosting risk appetite in the market and pushing the US dollar lower. In other news, March Commerce Department durable goods orders fell -0.8 % less than forecast in March and purchases of new homes in the US last month were higher than anticipated, both providing further evidence the market may be stabilizing.
The euro strengthened to its highest level in a week against the US dollar after a better-than-expected German business confidence survey sparked optimism that the region's recession may not be worsening. The German Ifo business climate index rose to 83.7 in April from 82.2 in March, beating forecasts for 82.3, while the survey's current conditions and expectations indices also rose. The single currency’s strong performance came as the Ifo data and a string of economic data recently have given signs of a tentative improvement, with further figures on Friday showing French consumer spending also rose much more than forecast in March.
Sterling fell to a two week low against the euro and steadied against the US dollar after data showed the UK economy's fall in the first quarter was its fastest in 30 years, casting doubt on the government's economic outlook. Britain's first-quarter gross domestic product fell 4.1 percent year-on-year, the biggest annual drop since the end of 1980. Analysts had been expecting a 3.8 percent contraction. The news of such a weak GDP reading overshadowed better-than-expected retail sales data for March.
The Japanese yen hit its highest level in about four weeks against the US dollar, driven by the unwinding of the carry trade. The yen benefited broadly with ongoing concerns about the US stress tests on banks and the fate of US automakers, encouraging investors to seek the perceived safety of the Japanese currency.
The Canadian dollar rose to a three week high after central bank policy makers refrained from committing to using so-called credit and quantitative easing to spur growth and lift the economy from a recession. The Canadian dollar is being pushed higher on relief that the central bank doesn’t necessarily see the need for further aggressive monetary policy.
The Australian dollar was subdued against the US dollar as a mixed bag of economic data and perennial fears some major US banks may be insolvent overshadowed firmer US stocks. The Aussie dollar also hovered near six-week highs against the New Zealand dollar, supported by speculation New Zealand's central bank would cut interest rates aggressively next week. The New Zealand dollar edged higher against a broadly soft US dollar, though gains were limited by expectations of a 50 basis point interest rate cut next week.
