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 user 2007-04-18 at 2:35:00 pm Views: 50
  • #17853

    The U.S. dollar weakened to a new 2-year low versus the euro
    U.S. dollar weakened to a new 2-year low versus the euro this morning
    after a report showed core U.S. consumer prices rose by less than
    expected in March, supporting a view that U.S. interest rates may be
    set to move lower. The Labor Department stated that consumer prices
    rose 0.6 percent last month.  Excluding food and energy costs, they
    expanded 0.1 percent, below economists’ median forecast for a 0.2
    percent increase. Another U.S. government report showed that the pace
    of home construction rose 0.8 percent in March to a rate that beat
    analysts’ predictions, although the rise was well below the previous
    month’s increase. Expect the dollar to remain on the defense throughout
    today’s session as the market looks to data releases set for later in
    the week for additional clues on the health of America’s economy.

    The Euro hit a fresh two-year high against the US dollar overnight, driven higher by the release of US consumer price data.

    British pound rallied to $2 overnight, touching levels not seen for
    almost 15 years as news of accelerating British inflation last month
    stoked expectations of a further rise in borrowing costs from the Bank
    of England. Data showing a 3.1 percent annual jump in British consumer
    price inflation in March – the highest since comparable records began
    in 1997 – served as the impetus for the pounds appreciation. The
    psychologically significant two-for-one level was last touched just
    before the currency’s ejection from the European Union’s Exchange Rate
    Mechanism in September 1992. Currency market analysts believe that
    further pound gains are likely. A move above $2.01 would herald the
    highest level in over quarter of a century.
    The Chinese yuan closed
    slightly higher against the dollar overnight, stabilizing after its
    third-biggest one-day fall of the year on Monday as dollar supplies in
    the market felt a temporary pinch. Monday’s fall came after the
    People’s Bank of China set the yuan’s daily mid-point at a
    post-revaluation high of 7.7220, indicating the market was at odds with
    the central bank’s apparent willingness to let the yuan rise toward
    7.7200. A recently reduced flow of dollars into the domestic foreign
    exchange market, as indicated by China’s sharply lower trade surplus in
    March, meant that the yuan’s appreciation could continue at the slower
    pace seen since February. Global weakness of the Japanese yen, whose
    movements often influence other Asian currencies, would also have a
    negative impact on yuan appreciation.

    The Canadian dollar added
    to its near-five month highs against the US dollar this morning, as oil
    prices rose while weaker-than-expected U.S. inflation data kept the
    U.S. currency on the defensive. A one percent gain in crude oil futures
    and a 0.6 percent monthly rise in U.S. consumer prices gave traders few
    reasons to step away from the currency.

    The Australian dollar
    consolidated within its recent range overnight, trading just below
    17-year peaks against the U.S. currency as investors took a breather
    ahead of key data next week which could give fresh clues on domestic
    monetary policy. The currency is expected to be broadly supported by
    rising gold and commodity prices and increased demand for carry
    trades.  On the economic data front, the currency was oblivious to a
    quarterly survey from National Australia Bank which showed Australian
    businesses reported strong trading conditions last quarter, generating
    more demand for labor and leaving the economy with little spare

    The Mexican peso remained sidelined against the US
    dollar as Mexican equities consolidated after hitting record highs last
    week.  In other economic news, Citigroup downgraded the country’s
    benchmark stock index to “underweight” after investors had overreacted
    to a pension reform law approved by Congress in March, which seemed to
    have no tangible short-term benefit. Mexican stocks have gained almost
    11 percent in the last month, boosted in part by investor enthusiasm
    over an alliance in Congress, made public about mid-March, to overhaul
    the public sector pension system.