Dollar Pounded Versus European Majors As Economic Woes Mount
The bottom fell out on the dollar Monday after Federal Reserve Chairman Ben Bernanke suggested the economy is a long way from a full recovery, fueling speculation the central bank will ramp up quantitative easing.
The dollar was already taking a beating against the sterling and loonie before Bernanke’s remarks to a southern leadership conference in South Carolina, then plunged versus the euro as Wall Street digested his dovish words.
Another round of troubling economic data from the US, along with further evidence that Europe is in better shape than once feared, kept the dollar under pressure all day following a brutal month of July.
The dollar dropped to 1.3190 versus the euro, its lowest since May 3. Two months ago, the dollar hit a 4-year high of 1.1805, but has since been walloped on increased risk appetite.
The buck also fell sharply versus the sterling, touching a fresh 6-month low of 1.5906.
With crude oil jumping above $81 for the first time since May, the dollar dropped to C$1.0203 versus its petro-linked Canadian counterpart.
And against the yen the dollar failed to move away from last week’s 2010 low, holding around Y86.50.
Manufacturing activity in the month of July expanded at a slower pace than in the previous month, indicating the factory sector continues to lose momentum amid a slowdown in consumer demand.
The Institute for Supply Management on Monday said its manufacturing index fell to a reading of 55.5 in July from 56.2 in June, with a reading above 50 indicating continued growth in the sector. Economists had expected the index to show a more notable decrease to a reading of 54.2.
Later, the markets got word of downbeat comments from Bernanke.
The U.S. still has a “considerable” way to go before a full recovery is achieved, Bernanke told a meeting of the Southern Legislative Conference in Charleston, South Carolina.
“To be sure, notable restraints on the recovery persist,” Bernanke said in prepared remarks. “The housing market has remained weak, with the overhang of vacant or foreclosed houses weighing on home prices and new construction.”
