The US dollar fell vs. most major currencies today as the increase in risk appetite kept investors from the safe-haven dollar. The release of stress test results is expected to confirm that many US banks need billions of dollars of fresh capital but investors were heartened that no banks were considered insolvent. The news shored up the banking sector and brings more clarity to the market.
Investors also await news of the jobs report due on Friday.
The euro rose to a 1-month high of $1.3454 against the dollar with growing optimism about the world economy. The European Central Bank cut its interest rates to 1.0% and said it intends to buy euro-denominated covered bonds.
Analysts say the BOE’s move toward unconventional policy was not as sweeping as programs by the US Federal Reserve and the Bank of England.
Sterling fell from a 4-month high of $1.5198 against the dollar after the Bank of England extended its quantitative easing program. The Bank of England is increasing the size of its asset purchase program by 50 billion pounds.
The yen weakened against the dollar as optimism in the recovery of the global economy helped increase risk appetite.
The Canadian dollar was a little higher against the dollar today with the rise in the price of oil, a major Canadian export. Investors await news for Canadian and US jobs data which is due on Friday. Earlier the loonie rose to 6 months high as the price of oil rose toward $58 a barrel, its highest level in 2009.
The Australian dollar strengthened to a seven-month high of $0.7563 against the dollar after a jump in the employment rate. Australia’s employment beat expectations with a rise of 27,300 jobs in April, better than expected fall of 25,000. The unemployment rate came back down to 5.4%, from a five-year high of 5.7% in March. The better jobs data raised doubts on the need for more interest rate cuts from the current 3% in the next few months. The New Zealand dollar hit a three-week high of $0.5911 after the release of better than expected jobs data. The job losses were in line with expectations with a loss of 24,000 jobs. The unemployment figures came in better than expectations at 5.0%, beating forecasts of 5.3%. Both the kiwi and Aussie were also helped from an increase in risk appetite on signs that the condition of the US banking system may be recovering, ahead of government stress test results.
The Mexican peso rose against the dollar with optimism that the results of government stress tests for US banks would show that the banks are recovering. Economic activity also has improved in Mexico after a outbreak in the swine flu caused a shutdown of business that mostly ended on Wednesday.
