United States Dollar: The US dollar weakened versus the British pound but gained against the euro Wednesday ahead of a US retail sales report Thursday that is expected to show growth stalled in January.
The greenback gained broadly Wednesday, in part because new Fed Chief Janet Yellen didn’t offer any clue in a congressional testimony Tuesday about reducing the pace of winding-up of an outsized bond-buying program now running at $65 billion a month.
Addressing the House Financial Services Committee yesterday, Yellen said policymakers would continue to scale back stimulus in measured step while reiterating her predecessor Ben Bernanke’s line that asset purchases aren’t on a preset course. The recovery in the labor market is far from complete, she noted.
January US retails sales stagnated after a 0.2 percent increase in December, according to a survey of economists ahead of the Commerce Department’s report Friday.
The ICE-dollar index, which measures the greenback’s value against a basket of six rivals, climbed to 80.718 from late Tuesday’s 80.634.
The WSJ Dollar Index, an alternative benchmark that uses a slightly broader basket, rose to 73.86 from late Tuesday’s level of 73.84.
EURO: The euro slipped against most of its 16 major trading peers Wednesday after a top European Central bank official said the bank is seriously considering a negative deposit rate to boost lending.
The deposit rate, at which banks park excess funds with the central bank, now stands at zero percent.
The euro dropped to $1.3592 from late Tuesday’s level of $1.3640.
ECB executive board member Benoit Coeure said the central bank is seriously considering negative deposit rates while addressing a Reuters Summit.
The euro came under pressure after data released by European statistics office Eurostat said industrial output declined 0.7 percent in December from a revised 1.6 percent gain the previous month. That was more than double the 0.3 percent drop economists forecasted.
The region’s Gross Domestic Product probably grew by 0.2 percent in the quarter ended through December, according to economists ahead of Friday’s report from Eurostat.
Japanese Yen: The yen strengthened versus the greenback Wednesday as investors’ appetite for safe assets rose following a decline in European manufacturing output.
The Japanese unit rose to 102.44 per US dollar from 102.64 late Tuesday. It rose 0.4 percent to 139.37 per euro.
The yen rose 0.2 percent to 102.33 in recent Asian trade in Tokyo.
The yen found support after Japan’s Cabinet Office said the overall uptrend for core machine orders remained intact despite a 15.7 percent decline in December.
British Pound: Sterling surged to a three-month high against the US dollar Wednesday after the Bank of England revised its growth forecasts upwards, spurring speculation of an interest rate hike sooner than estimated.
The British unit rose to $1.6587 from late Tuesday’s level of $1.6450.
The BoE now expects gross domestic product to expand by 3.4 percent this year from a previous November estimate of 2.8 percent. Unemployment rate could fall below the bank’s seven percent target by spring, Governor Mark Carney said Wednesday.
The central bank in August said the central bank won’t hike rates until jobless rate fell to 7 percent. In its quarterly inflation report published Wednesday, BoE recast its guidance on future interest rates to say instead of focusing on the labor market to determine borrowing costs, it would use monetary policy too boost growth.
Markets are, however, unwilling to trust Carney due to lack of specifics, said currency strategists Wednesday while explaining the pound’s rally.
Canadian Dollar: The Canadian dollar finished higher Wednesday as commodity prices got a boost following robust trade data from China.
The loonie, as the Canadian dollar is popularly known, finished at C$1.0998 per US dollar, up 0.2 percent on the day.
The loonie found support after data released Wednesday showed the Teranet-National Bank house price index rose following a 4.5 percent jump in house prices in January. Home values rose the most in Toronto, Vancouver and Montreal, the report showed.
Federal Finance Minister Jim Flaherty released a budget Tuesday that projects a surplus of C$6.4 billion in 2015. The budget for 104-15 was close to balance, with a $2.9 billion deficit and $3 billion contingency fund. That shows commitment to fiscal responsibility and gives the government room to try and stimulate the recovery, said currency strategists.
Data released Wednesday showed China’s exports jumped 10.6 percent to $126.7 billion while imports surged by 10 percent to $107.2 billion, easing concerns of a slowdown in the world’s second largest economy.
Crude oil, Canada’s biggest export, rose 43 cents with March futures contracts finishing at $100.37 a barrel on the New York Mercantile Exchange Wednesday.
Australian Dollar: The Australian dollar gave up early gains versus its US counterpart Wednesday after a report showed cut jobs unexpectedly in January, pushing unemployment to the highest level since 2003.
The Aussie, as the Australian dollar is popularly known, fell to 89.44 US cents after rising to 90.67 US cents yesterday.
Australian employers cut 3,500 jobs in January, the Australian Bureau of Statistics said in a recent release. That was well short of the 15,000 gain economists had forecast. Unemployment rate rose to 6 percent in January from 5.8 percent, the highest in a decade since 2003.
The Aussie got a lift earlier after data showed Chinese imports and exports rose more than estimated in January. China is Australia’s biggest trade partner. An earlier report showed Australian house prices jumped 9.3 percent in the final quarter of 2013, the highest in more than three years. Business confidence rose in January for the first time in four months, a separate report by the National Bank of Australia showed.
