The US dollar remains under pressure as investors’ risk appetite remains insatiate. Falling against most of the majors this morning as investors clung to hopes that the global economy is starting to recover, reducing safe-haven demand for the greenback.
Fueling the positive outlook for the US recovery were data released today showing initial jobless claims were lower than expected, though May’s retail sales data was less encouraging, as most of the gain was tied to higher gasoline prices.
Keeping dollar investors sidelined are recent comments out of Russia. Russia's central bank said it would divert some of its reserves away from U.S. Treasuries, a move that may be highlighted when the world's largest emerging countries meet in Moscow next week.
Market participants will look to a two-day meeting of finance ministers from the Group of Eight nations in Italy tomorrow, although few in the market expected that foreign exchange will take the spotlight at the gathering.
The dollar edged higher against the Japanese yen after positive US data boosted hopes that the worst of the recession was over. The ongoing move away from safe-haven currencies is hurting both the USD and yen.
The euro continues to trend within a tight range against the dollar, holding tightly to recent gains against the dollar, as stock futures rose and investors’ outlook on the global economy brightens.
France is watching foreign exchange markets closely because of concern over the risk of excessive volatility, a French official said. The comments were made ahead of a weekend meeting of finance ministers from the G-8 developed countries.
The sterling extended its gains, hitting its highest level in 2009 versus the euro, reflecting the belief that the economy is over the worst of the recession.
A poll showing rising UK inflation expectations and data pointing to economic growth in April and May bolstered the view that the UK economy may be recovering.
Nothing much has changed for the loonie this morning. Soaring oil prices and equity markets as well as pressure on the USD are keeping the Canadian dollar well supported. The Canadian dollar rose against the U.S. dollar after the International Energy Agency raised its 2009 oil demand estimates.
Investors are most likely eyeing a speech by Bank of Canada Governor Mark Carney later today, as he will likely discuss the CAD or be asked about its recent rise.
Advancing stocks reflected renewed interest in riskier assets, supporting high yielders including the Australian and New Zealand dollars at the expense of the US dollar.
Surprising markets was a resilient jobs data report, prompting investors to price out almost any risk of another cut in interest rates. Analysts are now toying with the notion of a possible rate hike within 12 months, seemingly gifting the Aussie a rich rate advantage over its main competitors for some time to come. The New Zealand dollar climbed to a one-week high after the central bank kept interest rates unchanged for the first time in nearly a year and pledged to keep them low for longer.
The Reserve Bank of New Zealand Governor left the door open for further rate cuts, and reiterated previous comments that rates would remain low into late 2010, but said there were indications of economic stabilization.
