Dollar Falls Against European Majors
Friday during early deals, the U.S. dollar slumped against its U.K., European and Swiss counterparts as an advance in stock prices reduced demand for the safe-haven greenback.
Taking cues from Wall Street, where the stocks ended higher yesterday, Asian and European stocks traded higher today amid increasing hopes of economic recovery.
Traders digested a report from the U.S. Labor Department showing that initial jobless claims for the week ended June 20th came in at 627,000, up from last week’s revised figure of 612,000.
In a separate report, the Commerce Department revealed yesterday that the first quarter GDP contracted by a revised 5.5% compared to the 5.7% decrease that had been reported in the preliminary report.
Higher oil prices also weakened the U.S. currency. At 4:39 am ET, the benchmark August U.S. crude oil contract was up 88 cents per barrel at $71.11, having hit a high of $71.23, up $1. London Brent rose 85 cents to $70.63.
Investors now look forward to the North American session, in which U.S. Bureau of Economic Analysis is due to release its personal income & outlays report for May at 8:30 am ET. Economists estimate the report to show that personal income rose 0.2% and the personal spending increased 0.4% in the month.
At 10:00 am ET, the Reuters/University of Michigan’s final report on the consumer sentiment index for June is scheduled to be released. Consumer confidence is expected to rise in the month, with economists forecasting an increase in the index to 69 from the previous month’s reading of 68.7.
The dollar, which closed yesterday’s trading at 1.0944 against the Swiss franc dropped to a 2-day low of 1.0883 during early deals on Friday. The next support level for the dollar-franc pair is seen at 1.077.
The franc strengthened as the Swiss KOF leading indicator rose more than expected in June.
KOF economic think tank said its economic barometer for Switzerland rose to minus 1.65 in June from May’s revised reading of minus 1.85. Meanwhile, economists had expected the indicator to rise to minus 1.75.
In early trading on Friday, the dollar fell to a 2-day low of 1.4068 against the euro. This may be compared to Thursday’s close of 1.3989. If the dollar moves down further, it may likely target the 1.414 level.
Germany’s Federal Statistical Office said in a report that the import price index dropped 10.4% year-over-year in May, compared to the 8.6% fall in the previous month. This was the highest price decline since February 1987. Economists were looking for a decline of 10.3%.
On a monthly basis, import prices remained unchanged in May, after falling 0.8% in April. Economists had predicted an increase of 0.3%. Meanwhile, export prices declined 2.7% year-on-year in May, compared to the 2% drop in the previous month. Export prices dropped 0.1% compared to the preceding month.
Meanwhile, the French statistical office INSEE said in a report that the consumer confidence stood at minus 37 in June, up from minus 40 in May. Economists had expected a reading of minus 39 for June.
Against the pound, the dollar slipped to a 2-day low of 1.6502 in early trading on Friday. On the downside, 1.660 is seen as the next target level for the U.S. currency. At yesterday’s close, the pound-dollar pair was quoted at 1.6373.
The dollar declined to 95.64 against the yen at 8:25 pm ET Thursday. Although the dollar advanced thereafter, it pulled back again after reaching a high of 96.06 by about 2:50 am ET Friday. At present, the dollar-yen pair is worth 95.73, down from yesterday’s North American session close of 95.92.
Japan’s Ministry of Internal Affairs and Communications reported that the overall Consumer Price Index fell by 1.1% in May, and the Core CPI, which excludes volatile fresh food prices, also fell 1.1%.
Falling energy prices led to the lower price readings. The overall CPI for the Tokyo Metropolitan region, which is seen as a leading indicator for the national picture, contracted 1.5% in June, while Tokyo Core CPI was down 1.3%.
