Dollar Eases On Fading Hopes For Robust Recovery
The dollar gave back a fraction of its recent gains on Monday, as another round of disappointing economic data raised concerns that the U.S. recovery is fizzling out.
With the economy in the dumps and the Federal Reserve’s quantitative easing program slated to end in June, economists expect the central bank to once again promise to keep interest rates near zero through 2011.
Some members of the Fed have hinted lately that a rate hike may be coming before year’s end, but have based their comments on estimates for 3-3.5 percent annual GDP growth — a pipe dream unless things improve dramatically in the second half of the year.
The dollar dropped to $1.4225 versus the euro compared to a 7-week hight near $1.4050. The euro stabilized even after the shocking arrest of International Monetary Fund managing director Dominique Strauss-Kahn on sex assault charges.
It is feared that Strauss-Kahn’s arrest may delay a bailout package for Greece, but reports suggest the EU and IMF are prepared to go ahead with a rescue designed to avoid a restructuring of Greek sovereign debt.
The dollar was steady near $1.6215 versus the sterling, having touched a monthly high of $1.6141 last week.
There was little movement against the yen, with the pair locked into a tight range near Y81. With the exception of the incredible volatility seen during the immediate aftermath of Japan’s March earthquake, the dollar and yen have been locked in a stalemate for months.
Looking at today’s economic releases from around the world, U.S. home builder confidence has remained unchanged in the month of May, according to a report released by the National Association of Home Builders on Monday, with the index of home builder confidence remaining at the same level for six out of the past seven months.
Conditions for New York manufacturers have seen continued improvement in the month of May, according to a report released by the Federal Reserve Bank of New York on Monday, although the pace of growth in the sector slowed by much more than anticipated.
The New York Fed said its general business conditions index fell to 11.9 in May from 21.7 in April.
Across the Atlantic, data showed euro zone inflation remains well above European Central Bank target levels.
Annual inflation rose to 2.8 percent in April, the highest level since October 2008. The statistical office confirmed the flash estimate published on April 29. In March, the inflation rate was 2.7 percent.
