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Friday, the U.S. dollar tumbled against its major counterparts as growing hopes for a global recovery prompted investors to pick up riskier assets such as stocks, pushing up higher-yielding currencies.
The dollar slumped to an 8-day low against the pound, 2-day lows against the euro, franc and the kiwi and 3-day lows against the aussie and the loonie.
Risk appetite increased with the dollar and the yen coming under pressure and stocks and oil rising after Thursday's solid U.S. earnings reports and a drop in the number of Americans collecting long-term unemployment aid.
Asian stocks pushed higher today and were poised to score double-digit gains in July as investors kept pouring in funds on bets the region's growth will lead the global economy out of recession.
South Korea's benchmark KOSPI index hit a one-year high and Japan's Nikkei average hit a 10-month peak as upbeat corporate earnings report around the world have been viewed as more evidence that companies are coping well and poised to benefit from any recovery.
The dollar fell to a 2-day low of 1.4146 against the euro during early deals on Friday. If the dollar weakens further, it may likely target the 1.420 level.
The dollar rose to a 2-week high of 1.4009 against the euro on Wednesday as investors mulled over data showing the first annual decline in German consumer prices since March 1987. The decline in prices was steeper than what analysts' expected for the Euro-zone's largest economy.
But the dollar pared its gains yesterday as the euro was supported by the Euro-zone economic sentiment index, which improved for the fourth consecutive month in July, pointing towards a possibility of positive growth in the economy during the second half of 2009. At yesterday's New York session close, the euro-dollar pair was quoted at 1.4076.
The dollar has dropped 1% against the euro since reaching a 2-week high. The dollar lost 2% against the euro this month, following a 0.6% gain in June.
In early deals on Friday, the dollar slipped to a 2-day low of 1.0840 against the Swiss franc. This may be compared to yesterday's close of 1.0879. On the downside, 1.080 is seen as the next target level for the U.S. currency.
After hitting a 7-week low of 1.0626 against the franc on July 21, the dollar advanced 3% and rose to a 16-day high of 1.0937 yesterday morning in New York. However, the dollar weakened in afternoon deals and extended its slide today. Since then, the dollar-franc pair has declined 1%.
The dollar plunged to an 8-day low against the pound today after GfK NOP said in an e-mailed statement that an index of consumer sentiment in the U.K. was unchanged in July at minus 25, adding to signs Britain is emerging from recession. The reading is up from minus 39 a year earlier.
The Nationwide Building Society said yesterday that house prices rose in U.K. for a third straight month in July.
The Bank of England policy maker Andrew Sentance said last week the bank may pause its plan to stoke growth by buying bonds if forecasts next month point to an improvement.
The dollar that closed yesterday's trading at 1.6501 against the pound plunged to an 8-day low of 1.6574 in early deals on Friday. The next downside target for the dollar is seen around the 1.675 level.
The dollar has slipped 1.4% against the pound since reaching an 8-day high of 1.6342 yesterday.
During early deals on Friday, the dollar weakened against the Japanese yen. At 2:30 am ET, the dollar-yen pair touched 95.23, down from yesterday's close of 95.59. The near term support for the U.S. currency is seen around the 94.9 level.
Japan's core consumer price index sank a record 1.7% year-on-year to 100.3 in June, declining for the fourth straight month, the Ministry of Internal Affairs said today. The core CPI for the Tokyo metropolitan area, considered a bellwether for nationwide price trends, also fell at its fastest pace in July, down 1.7% to 99.7.
According to a release from the Ministry of Internal Affairs, Japan's unemployment rate rose 0.2 percentage points from the previous month to 5.4% in June, marking the fifth straight month of increase. The number of jobless rose for the eight consecutive month to 3.48 million, an increase of 830,000. The number of people who were forced to quit their jobs due to employers' circumstances increased by 62,000, while 40,000 fewer left their jobs on their own.
The dollar jumped to more than a 3-week high of 95.90 against the yen yesterday, up 4% from a 5-month low of 91.76 hit on July 13. Positive economic data, rising stocks and better-than-expected earnings improved risk appetite, thus damping demand for the Japanese currency.
The greenback also fell to multi-day lows against commodity related currencies namely the aussie, kiwi and the loonie on higher oil prices.
Oil extended gains above $67 a barrel today, after a 5.7 percent jump yesterday on U.S. data and earnings which renewed hopes of an economic recovery and drove up equity and commodities markets.
U.S. light crude for September delivery rose 44 cents to $67.38 a barrel in Asian deals, having settled up $3.59, or 5.67 percent at $66.94, its biggest one-day gain since April 9. London Brent crude gained 34 cents to $70.45.
The U.S. dollar, which closed yesterday's trading at 0.8258 against the Aussie declined to a 3-day low of 0.8306 during early deals on Friday. The next downside target level for the greenback is seen at 0.834.
The Aussie was supported after a report by the TD Securities and the Melbourne Institute showed that a gauge of inflation accelerated in July as prices rose for communications, utilities and local government taxes.
The gauge rose 0.9% in July, which is the steepest rise in the seven-year history of the survey. This comes after a 0.4% rise in June.
During early deals on Friday, the U.S. currency slipped to a 2-day low of 0.6582 against the NZ dollar and a 3-day low of 1.0788 against the Canadian dollar. The next downside target level for the greenback is seen at 0.663 against the kiwi and 1.075 against the loonie. The kiwi-greenback pair closed trading at 0.6525 and the greenback-loonie pair at 1.0839 on Thursday.
The Italian June PPI and the Euro-zone July CPI and unemployment report for June are expected in the upcoming hours.
Turning to the U.S., the second quarter GDP report has been slated for release at 8:30 am ET. Analysts expect the U.S. economy probably shrank at a slower pace in the second quarter, a sign the worst recession in half a century is winding down.
Recent reports showed the housing slump, which helped trigger the financial crisis last year, and the decline in manufacturing have eased.
Most of the Fed's 12 regional banks reported a slower pace of economic decline in June and July, the central bank's regional survey of activity showed this week. Fed Chairman Ben Bernanke told Congress last week that there were "tentative signs of stabilization."
Today's report is likely to show that the U.S. economy contracted at a 1.5% rate in the second quarter, after dropping 5.5% in the first quarter.
The Canadian GDP report for May is also scheduled for release at 8:30 am ET.
At 9:45 am ET, the results of the Institute of Supply Management-Chicago's business survey for July are scheduled to be released. Economists expect the business barometer index based on the survey to come in at 43.
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