Bernanke: rate rises might pause
April 27, 2006
In testimony before the US Congress on Thursday, Federal Reserve Chairman Ben Bernanke said that it is his belief that economic growth in the US will become more moderate as the year progresses and that this will put growth at a “more sustainable” level. He also said that at some point the Fed will likely wait out a month or two without raising interest rates in an effort to “receive information more relevant to the outlook”. Despite these comments, it is still expected that the Fed will hike interest rates by another quarter point, to 5 percent, when it meets next on May 10.
US Treasury bonds saw yields drop in reaction to Mr. Bernanke’s comments. The two-year bond dropped 6.4 basis points to a yield of 4.925 percent, while the slightly less-sensitive to rates ten-year bond was down by 2 basis points to 5.090 percent. The dollar weakened in response to the remarks, hitting $1.25 versus the euro, a seven-month low. Sterling added 1 percent against the dollar, to $1.80. The equities markets were initially up after hearing Mr. Bernanke’s testimony, but then turned mixed as investors had time to absorb his comments.
Among other remarks, Mr. Bernanke said that rising energy prices were a concern, posing risks to inflation and to economic activity, but that if prices stabilize their negative effect should be minimized. He also commented on the housing market, saying that while the outlook there is uncertain, current data indicates that this sector of the economy should cool down gradually rather than experiencing a sharp downturn.
Dollar weaker despite data
April 26, 2006
Strong new economic data in the United States on Wednesday did not help the dollar in its slide against the euro. The dollar was weaker not only in relation to the shared currency, but versus the Japanese yen and sterling as well.
Among the new data reported on the day was a hike in durable goods orders of 6.1 percent in March, when only a 1.8 percent increase had been anticipated. Aircraft orders played a big role in the size of the increase, but even without that component the core reading was up 3 percent. In addition, new home sales were up in March, giving lie to the idea that the housing market was beginning to slow down. Another aspect of the dollars weakness, according to some analysts, was investor hesitation to move ahead of the day’s scheduled testimony before Congress by Federal Reserve Chairman Ben Bernanke.
At any rate, the dollar dropped 0.3 percent in relation to the euro, to $1.2462, while it dropped a fraction to ¥114.66 versus the yen and to $1.7893 against sterling.
Elsewhere, the Australian dollar was up 1.1 percent to $0.7537 versus the greenback as consumer prices down under were up 3 percent in the first quarter from a year earlier, spurring talk of more tightening of monetary policy. The Canadian dollar also gained strength versus the US dollar, adding 0.3 percent to C$1.1273 on data showing labor productivity in Canada up by 2.2 percent last year.
In Asia, the Chinese renminbi was slightly weaker versus the US dollar at Rmb8.0175 and the South Korean won was also slightly down in relation to the greenback to Won946.2 to the dollar. These declines were said by some analysts to have to do with Asian resistance to G7 calls for more flexibility in Asian currencies.
Bond yields up
April 25, 2006
Yields on US Treasury bonds were also up on the day after the Conference Board reported consumer confidence in the United States at its highest level in four years in April, with its consumer confidence index at 109.6 in April, up from 107.2 in March. April’s index level had been expected to decline. In addition, existing home sales in the US were up 0.3 percent tin March against in expected drop.
At late morning in New York, ten-year Treasury bonds were yielding 5.079 percent, in increase of 9.4 basis points. Two-year bonds were up 6.9 basis points to a yield of 4.954 percent.
US dollar strengthens on profit-taking
April 20, 2006
The US dollar strengthened on Thursday after three days of losses, but the gains were explained by profit taking by most analysts, rather than any real shift in sentiment. The gains came even though the Conference Board’s index of leading economic indicators showed weakening due to rising energy prices.
The greenback added 0.4 percent versus the euro to $1.2321, while it was up 0.3 percent to ¥117.56 in relation to the Japanese yen and it gained 0.7 percent against sterling, to $1.7795. In addition, the US dollar was up 1.3 percent versus both the Australian and New Zealand dollars, to $0.7371 and $0.6261 respectively. The US currency also added 2 percent to $6.06 in relation to the South African rand.
Dollar mixed ahead of Fed minutes
April 18, 2006
The US dollar was slightly stronger in relation to the euro and the yen on Tuesday, but it weakened against sterling as investors awaited the release of minutes from the most recent meeting of the US Federal Reserve. Help for the dollar was found in new core producer price index data, which does not take into account food and energy costs. The index was up only 0.1 percent in March, less than had been anticipated. Other new economic data included news that housing starts were down 7.8 percent in March.
The greenback gained 0.1 percent on the euro and it was also up 0.1 percent to ¥117.7. However, the dollar dropped 0.2 percent to $1.7762 versus sterling, the lowest level since February.
World events helped the Swiss franc add 0.1 percent against the US dollar, to SFr1.2759, the highest it has been in three months.
So far this week, both the Australian and New Zealand dollars have gained on the US dollar. The Aussie has advanced by 1.7 percent to $0.7383 against the greenback, while the Kiwi has added 1.4 percent to $0.6272.
The Mexican peso has also advanced on the US dollar ahead of the upcoming presidential election in Mexico, where Mexico City’s mayor holds a 38 percent to 34 percent lead over the conservative ruling party candidate in the latest polls. The peso added 0.9 percent to 10.9825 pesos to the dollar.
US dollar weaker in light trade
April 17, 2006
Indications that US interest rates might peak at 5 percent and climbing crude oil prices combined for a weaker US dollar on Monday despite positive data on capital inflows.
The greenback dropped 1.5 percent to $1.2270 in relation to the euro and lost 0.7 percent to the Japanese yen, to ¥117.64. It was the dollar’s lowest level versus the yen in two weeks. The US currency declined 1.1 percent to $1.7709 against sterling and was down 1.8 percent to SFr1.2775 versus the Swiss franc.
New data showed that net inflows into the US in February were at $86.9 billion, much higher than the $62.6 billion that had been expected. The money coming in was more than enough to cover the months trade deficit of $65.7 billion. That was the good news.
Bad news for the dollar came in a Wall Street Journal article, which claimed that Federal Reserve officials were not inclined to raise interest rates after an expected hike in May to 5 percent. Worries over higher crude oil prices, exaggerated by the insistence of Iran that it will continue pursuing its nuclear ambitions, also hurt the greenback. Also causing concern was a new Empire State manufacturing survey from the New York Federal Reserve, which showed the index level at 15.81 in April. It was expected to be at 24.50. Additionally, the March survey was revised down to 29.03.
US dollar strengthens versus euro
April 12, 2006
The US dollar was stronger in relation to other currencies on Wednesday on new data showing that the US trade deficit had gotten smaller. After consideration of the new figures, however, investors sent the greenback slightly lower again for a mixed day overall.
The trade deficit shrunk by $2.9 billion in February to $65.7 billion, while the bilateral deficit with China dropped by $4.1 billion, from $17.9 billion to $13.8 billion. This unexpectedly large decline in the deficit with China was at least partly due to the timing of the Chinese New Year. The bilateral deficits with the European Union and Canada were also lower. The US exported goods and services worth $113 billion in February, $1.3 billion less than in January. However, imports declined even faster and were down by $4.2 billion to $178.7 billion.
At one point in the day, the dollar had risen to $1.2067 versus the euro, but when analysts concluded that the lower deficit was likely not the beginning of a trend, the dollar weakened. While it eventually settled at $1.2109 in relation to the euro, 0.2 percent higher, the greenback lost 0.1 percent against the Japanese yen, to ¥118.46.
US bond yields down
April 10, 2006
Yields on US Treasury bonds were down on Monday as investors wait for new economic data scheduled for release later in the week. Also helping bond prices were comments by Federal Reserve governor Susan Bies, who implied that further hikes in the interest rate are not necessarily a given. Most analysts, however, still believe that rate hikes will come in May and possibly in June.
After reaching a yield of 4.994 percent on Friday, ten-year bond yields were down 2.5 basis points to 4.961 percent during the day Monday. Two-year yields were down 1.6 basis points to a yield of 4.898 percent.
Yields on Treasury notes down
April 4, 2006
Yields on US Treasury bonds were down on Tuesday on profit-taking and a lack of news to inspire investors. At late morning, yields on ten-year notes had fallen by 0.8 basis points to 4.858 percent, down from 4.909 percent on Monday. Two-year yields were down by 2.1 basis points to 4.833 percent.