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Thursday during early deals, the U.S. dollar plunged to its lowest level in almost 1-year against the euro as the world stocks surged up on upbeat U.S. economic reports, which raised hopes that the pace of the global economic recovery was accelerating and kept up pressure on the dollar as investors sought out riskier assets and higher-yielding currencies.
The dollar also plummeted to a 14-month low against the Swiss franc, 11 1/2 -month low against the Canadian dollar, 13-month low against the aussie and kiwi and a 2-day low against the pound.
In Asia, Japan's Nikkei 225 stock average rose 1.68% today as the central bank raised its assessment of the world's second-largest economy and kept interest rates at 0.1 percent to support a recovery.
Hong Kong's Hang Seng gained 1.8%, China's Shanghai benchmark rose 2.02% and South Korea's Kospi climbed 0.72%.
Elsewhere, the Australian and the New Zealand markets jumped 1.32% and 1.13%, respectively.
Following strong Asian stocks, the European markets opened higher today. Currently, Germany's DAX is up 0.71%, France's CAC is trading 0.66% higher. Meanwhile, U.K.'s FTSE 100 index is up 0.80%.
The continued strength in the markets came as traders reacted to some better than expected U.S. economic data, including a report from the Federal Reserve showing that industrial production increased for the second consecutive month in August.
Industrial production rose 0.8 percent in August following an upwardly revised 1.0 percent increase in July. Economists had expected production to increase by 0.6 percent compared to the 0.5 percent growth originally reported for the previous month.
In addition, a report released by the National Association of Home Builders showed that homebuilder confidence edged higher for a third consecutive month in September. The NAHB/Wells Fargo Housing Market Index edged up to 19 in September from 18 in August, meeting the expectations of economists. With the increase, the index rose to its highest level since May of 2008.
Federal Reserve Bank Chairman Ben Bernanke said on Tuesday that the U.S. financial system is beginning to emerge from a deep recession that is "technically over" and could have been "decidedly worse" had the U.S. and other countries not taken "aggressive" policy action.
Speaking at a forum at the Brookings Institution in Washington, D.C. Bernanke said that that the economic crisis was leveling out, but repeated his calls for regulatory reform, saying that the financial crisis emphasized the need to "urgently" address financial weaknesses so that similar financial collapses don't happen again.
During early deals on Thursday, the dollar fell to 1.4768 against the euro. This set the lowest point for the dollar since September 26, 2008. If the dollar drops further, it may target the 1.50 level. At yesterday's close, the euro-dollar pair was quoted at 1.4708.
The dollar has been showing weakness against the euro after it reached a 3 1/2 -month high of 1.2458 on March 04. Since then, the dollar has lost 16% against the euro.
The dollar, which closed yesterday's trading at 1.0322 against the Swiss franc tumbled to near a 14-month low of 1.0288 in early deals on Thursday. The next downside target level for the dollar-franc pair is seen at 1.020.
The Swiss central bank may hold its key interest rate near zero and keep measures in place to fight the risk of deflation even as the economy shows signs of emerging from recession.
The Swiss National Bank, led by Jean-Pierre Roth, will leave the three-month Libor target at 0.25 percent at today's quarterly monetary policy assessment. The SNB publishes the decision in Zurich at 8 am ET, when it will also release a policy statement.
Switzerland's worst economic slump in three decades has been compounded by the strength of the Swiss franc, which has fueled the risk of deflation by making imports cheaper. In March, the SNB started buying corporate bonds and foreign currencies in a bid to weaken the franc and prop up consumer prices, which it predicts will fall 0.5 percent this year.
After hitting a 17-month high of 1.2301 in November 2008, the dollar-franc pair dropped 16% and touched a 4-month low of 1.0374 on December 29, 2008. Although the dollar attempted to reverse direction thereafter, it weakened again in March 2009 and declined 14% thus far.
In early trading on Thursday, the dollar declined to a 2-day low of 1.6557 against the pound. That was down 1% from a 1-week high of 1.6406 hit on September 15. If the dollar slides further, 1.666 level is seen as the next target.
The dollar plunged to a 9 1/2 -month low of 1.7045 against the pound on August 05, down 21% from a 23 1/2- year high of 1.3507 hit in January 2009. But the dollar gained 5% after hitting a 9 1/2 -month low and reached a 1 1/2 -month high of 1.6116 on September 02. Since then, the dollar has been trading lower.
The dollar that strengthened against the yen in Asian deals on Thursday pared gains during early European trading on Thursday. At present, the dollar-yen pair is worth 90.60, slipped from an Asian session high of 91.24. On the downside, 90.1 is seen as the next target level for the U.S. currency.
In economic news from Japan, the Ministry of Economy, Trade & Industry announced today that Japan's tertiary industry activity index, which is a measure of the total output produced by the nation's service sector, reached a 5-month high in July, offering further evidence that the world's second largest economy is on the recovery track. Furthermore, business conditions have improved markedly in the third quarter, a separate report revealed.
Elsewhere, the policy board of the Bank of Japan unanimously decided to retain the overnight call rate at 0.1%, in line with the expectations of economists. The last change in the rate was a 0.1% cut in interest rates at the December 2008 meeting.
The dollar that rose to a 5 1/2 -month high of 101.46 against the yen on April 06 pared its gains thereafter. The dollar-yen pair extended its slide in the subsequent months and lost 11% to hit a fresh 7-month low of 90.14 yesterday.
However, amid some upbeat U.S. economic reports, the dollar-yen pair recovered its losses in the New York session yesterday and closed the day's trading at 90.94.
In early deals on Thursday, the dollar slumped to fresh multi-month lows against its Australian, New Zealand and Canadian counterparts as crude oil steadied above $72 a barrel today, taking a breather after a rise of more than 2 percent the previous day.
NYMEX crude for October delivery was up 5 cents at $72.56 a barrel by 2:36 am ET, after settling up $1.58 on Wednesday, when prices also got support from a weak U.S. dollar. ICE Brent was down 7 cents at $71.60.
Oil has more than doubled from this year's low of $32.70 hit on January 20 and is trading 51 percent below a record high of more than $147 struck in July 2008. The market this year hit a high of $75 on August 25.
The U.S. dollar tumbled to a 13-month low of 0.8778 against the Aussie and 0.7162 against the NZ currency. If the greenback falls further, it may likely target 0.90 against the aussie and 0.722 against the kiwi. The aussie-greenback and the kiwi-greenback pairs were worth 0.8740 and 0.7144, respectively at yesterday's close.
The U.S. currency, which closed yesterday's trading at 1.0672 against the Canadian dollar slipped to an 11 1/2 -month low of 1.0608 in today's early deals. The next downside target level for the greenback-loonie pair is seen at 1.050.
At 7:00 am ET, the Canadian CPI report for August has been scheduled for release.
From the U.S., a report on housing starts for August is slated to be released at 8:30 am ET today.
At the same time, the Labor Department is due to release its customary jobless claims report for the week ended September 12th.
The results of the Philadelphia Federal Reserve's manufacturing survey are due out at am ET. Economists expect the diffusion index of current activity to show a reading of 8 for September.
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