The US dollar rose vs. most major currencies as investors fled to the safe-haven currency. Data showed that MBA mortgage applications rose 2.8% over the week, being the third consecutive weekly gain. The house price index was up 0.9% in May, beating forecasts of a 0.2% decrease, but was still down year-over-year. The positive data was unable to overcome statements from the Federal Reserve Chairman Ben Bernanke who say that the economy still remains weak. A bigger-than-expected second quarter loss from Morgan Stanley and continuing weakness from other banks also helped increase risk aversion.
The euro fell against the dollar as European industrial orders declined for a ninth month. The European Union’s statistics office reported that industrial orders slumped 30.1% in May from a year earlier, which was worse than forecasts of a 27.9% fall. One bright spot among the 16-nation Eurozone was consumer spending which increased 1.2% in June from a year earlier, beating forecasts of a 0.3% fall.
The British pound fell against the dollar after a report showed UK house-price declines will persist until 2012. The London-based National Institute of Economic and Social Research said that house prices will slide as the economy keeps shrinking until the final quarter. The Bank of England’s minutes showed that the nine-member Monetary Policy Committee voted 9-0 to keep interest rates steady at 0.5%. Also hurting the sterling was news that Barclays and Royal Bank of Scotland Group will require an additional $34.8 billion to expand under new regulatory rules.
The Japanese yen strengthened as investors increased risk aversion amid news of a bigger-than-expected loss at Morgan Stanley and requirements for additional capital at UK banks.
The Canadian dollar pared losses following a report that showed retail sales increased more than forecast in May. Earlier in the day, the loonie had fallen as much as 0.5% as crude oil prices fell. The loonie was helped by data from Statistics Canada which said that sales rose 1.2%, compared with forecasts of a 0.5% rise. There is suspicion from the Bank of Canada that there were data leaks from Statistics Canada, as there had been unusual movements in currency markets for the past few months.
The Australian and New Zealand dollar both fell against the dollar after statements from US Fed Chairman Ben Bernanke who said that dangers to the economy remain. These statements from Bernanke prompted investors to exit higher-yielding assets. Also adding to the risk aversion were expectations that CIT Group may still need to file for bankruptcy if it is unable to tender notes maturing next month. Australia’s consumer price index was up 0.5% in the second quarter, which was in line with expectations. The Reserve Bank of Australia aims to keep inflation between 2% and 3% on average.
