The New Zealand dollar benefited from recent upbeat data

The US dollar tumbled against a basket of currencies after weak U.S. housing and inflation data spurred concerns about the pace of a U.S. recovery. U.S. housing starts slid 1 percent in July, the first drop in three months after a 6.5 percent rise the previous month. Meanwhile, producer prices fell 0.9 percent last month after surging 1.8 percent in June. This follows last week’s flat consumer prices, which suggested that the threat of inflation remains far away. Thus, interest rates will remain on hold.

The euro benefited from unexpected gains in German investor sentiment, which lifted optimism about the Eurozone economy. Last week, France and Germany, Europe’s two biggest economies, posted surprise growth in the second quarter. Even though there is evidence that Germany is coming out of a recession, euro gains were limited as risk appetite was held back due to sluggish U.S. data.

The British pound rose after inflation data beat estimates, which unexpectedly held at 1.8 percent in July. The Bank of England indicated last week that rates will not be raised for some time.

The Japanese yen fell even though Japanese economic growth expanded 3.7 percent during the second quarter.
Growth is expected to slow to an annual 2.9 percent pace in the third quarter amid falling business investment and rising unemployment.

The Canadian dollar is trading flat as crude oil fell as much as 1 percent to $66.11 a barrel. Losses in stocks and commodities also overshadowed reports that spurred optimism the recession may be easing.

The Australian dollar held gains after the Reserve Bank of Australia last week indicated that interest rates will have to be raised as the economy recovers.
Investors are speculating a possible rate hike during the fourth quarter.

The New Zealand dollar benefited from recent upbeat data. Retail sales rose for the first time in nearly two years in the second quarter and the housing market showed more signs of stabilizing. The news support a gradual recovery outlook while interest rates will remain steady in the near term.