US bond yields up on interest rate fears
May 30, 2006
In the US on Tuesday, concerns about future rises in the interest rate caused Treasury bond yields to rise. The new concern was spurred by comments by the president of the Chicago Federal Reserve that inflation is now at the upper end of the range at which the economy remains stable. However, bond yields did not rise as much as they could have as the equities markets saw significant declines, which tends to send investor money into bonds. Yields on two-year Treasury bonds were 2.1 basis points higher to 4.975 percent, while ten-year issues had added 3.4 basis points to a yield of 5.086 percent.
Consumer inflation up in US in April
May 17, 2006
New data released on Wednesday showed that consumer inflation in the United States rose more than expected in April. The consumer price index rose 0.6 percent in April, when it was expected to only go up by 0.5 percent. The core index, which takes costs for food and energy out of the equation, was up by 0.3 percent although it had been expected to rise by only 0.2 percent. On an annualized basis, prices overall were up 3.5 percent in April, while the core rate added 2.3 percent. The annualized core rate in March was 2.1 percent.
The new figures seem to show that high energy prices are beginning to be passed along to consumers. To this point, this passing along of producer costs to consumers has been relatively insignificant, but analysts have been looking for any indication that the pass-through is starting to pick up.
The news of the new consumer inflation figures sent stocks in New York down and yields on government bonds rose as investors figured that the new data makes it more likely that the Federal Reserve will raise interest rates again in June rather than leaving them at the present level, as many analysts had expected would happen.
Dollar weakens after one-day rally
May 16, 2006
The US dollar was down again on Tuesday after a day of gains on Monday. The declines came on reports that housing starts in the United States were down more than had been predicted. Producer price data was also under expectations. Both items convinced analysts that there is a good chance that the Federal Reserve will not raise interest rates at its next meeting.
By the middle of the trading day in New York, the greenback had lost 0.5 percent in relation to the euro to $1.2853. The US currency was also down 0.4 percent to ¥110.05 against the Japanese yen and it declined by 0.3 percent to $1.8855 versus sterling.
Emerging currencies also against the greenback on Tuesday. The Turkish lira added 3.3 percent to TL1.4355 in relation to the US dollar, gaining back more than half its 6.1 percent slide on Monday. The South African rand got back a third of its 3 percent drop on Monday, rising 1.1 percent to R6.3550 versus the US currency.
US dollar strengthens against almost all currencies
May 15, 2006
The US dollar strengthened Monday despite new capital inflows data showing that March inflows were at $69.8 billion, lower than had been predicted. Gains came as investors exited short positions not only against the dollar but against a number of other currencies as well.
At mid-afternoon in New York, the greenback had gained 0.7 percent to $1.2840 versus the euro. The US currency also was up 0.5 percent against sterling, to $1.8840, while it added 0.8 percent to SFr1.2080 in relation to the Swiss franc and advanced 0.4 percent to C$1.1124 versus the Canadian dollar. The Japanese yen was generally stronger on the day, but dropped 0.1 percent to ¥110.16 in relation to the US dollar.
Emerging currencies were mostly lower in relation to the greenback, as well. The only notable exception was the Chinese renminbi, which closed at Rmb8.0030, its highest position against the US dollar in more than 12 years. Elsewhere, the Turkish lira dropped 6.1 percent to TL1,4850 versus the greenback, the South African rand was down 3 percent against the dollar to R6.4255, and the South Korean won fell 1.1 percent to Won 943.40 in relation to the US currency. The Australian and New Zealand dollars were down 1 percent and 1.3 percent respectively against the greenback, to $0.7644 and $0.6215.
Dollar down on retail sales data
May 11, 2006
The US dollar tried to stage a rally on Thursday after the US Treasury declined to label China as a “currency manipulator” in its semi-annual foreign exchange report and after the Federal Reserve raised the interest rates another 25 basis points to 5 percent, but the rally fizzled out after new data on retail sales in the US showed a gain of only 0.5 percent in April overall, and an even lower 0.1 percent rise when gasoline sales were taken out of the equation.
After an initial gain of 0.9 percent in relation to the euro and the Japanese yen, by mid-afternoon in New York the greenback had lost 0.1 percent to the yen, to ¥110.47. In addition, the euro had recovered to gain 0.2 percent versus the dollar to $1.2823.
Concerns send dollar lower
May 10, 2006
The US dollar weakened further on Wednesday ahead of the Federal Reserve’s decision on whether to raise interest rates again, this time to 5 percent, as well as in anticipation of comments that might give a hint about whether there might be a pause in the series of rate raises in June. Investors were still nervous, as well, about a US Treasury report due later in the day that some say could label China as a “currency manipulator”. Even if this does not happen, triggering Asian currencies to advance against the greenback, comments from Harvard economics professor Martin Feldstein that the dollar might need to weaken a further 30 to 40 percent in order to bring the US trade deficit down were worrying to investors.
By the middle of the day in New York the US dollar had dropped 0.3 percent to $1.2792 versus the euro. The greenback was also down by 0.5 percent against the Japanese yen to ¥110.55 and it dropped 0.1 percent to SFr1.2192 in relation to the Swiss franc. The US currency hit yet another new 28-year low of C$1.0980 versus the Canadian dollar. The only major currency that the dollar did not weaken against was sterling, which was down just a bit to $1.8650.
US dollar weaker on sell-off
May 9, 2006
The US dollar was down again on Tuesday in an unexpected sell-off that analysts said had no obvious reason behind it. It was expected that there would be few fireworks the day before the Federal Reserve is set to make a decision on interest rates and ahead of a report from the US Treasury that could call China a “currency manipulator”. Several theories emerged to explain the sell-off, including a plan by the G7 to let the dollar weaken to ease imbalances and a delayed reaction to a report that Iran is considering setting up a market to trade oil in euros.
The greenback dropped 0.5 percent to $1.2754 in relation to the euro. It lost 0.4 percent versus the Japanese yen and sterling, to ¥111.27 and $1.8644 respectively. In addition, the US currency was down 0.6 percent to SFr1.2214 in relation to the Swiss franc and dropped 1 percent to a 28-year low of C$1.1014 versus the Canadian dollar.
According to reports, opinion was mixed on whether the upcoming Treasury report would actually go so far as to name China as a currency manipulator, but the majority seems to be coming around to the consensus that it will not. If the report does label China in this way, some analysts say that the dollar will likely weaken even more than it already has, while Asian currencies will strengthen. In this scenario, the euro and the Swiss franc could benefit.
Yields down on US Treasury bonds
May 5, 2006
Yields were down and prices up on US Treasury bonds on Friday on new data that helped calm fears that interest rate rises would go on longer than has been generally expected. It was revealed that only 138,000 new jobs were created in the United States in April, far below the 200,000 which had been expected. In addition, the March figure of 211,000 new jobs created was revised downward to 200,000. However, there was still some concern over interest rates from the news that average hourly earnings were up 0.5 percent in April, to an annualized rate of growth of 3.8 percent, the highest level since August 2001.
On this news, yields on two-year Treasury bonds dropped 3.8 basis points to 4.941 percent. Yields on ten-year issues were at 5.121 percent, a decline of 4 basis points.
US dollar weaker on European data
May 2, 2006
The US dollar was down on Tuesday after new economic data from the UK and the Eurozone provided boosts for the currencies of those nations.
The greenback was down 0.6 percent to $1.2647 versus the euro, lost 0.8 percent to $1.84 in relation to sterling, and dropped 0.2 percent to ¥113.22 versus the yen. The US currency also lost 0.6 percent to C$1.1073 against the Canadian dollar, which was helped by the possibility of future interest rate hikes and rising prices for gold and crude oil.
Elsewhere in the world, the Australian dollar gained 0.6 percent to $0.7626 versus the US dollar and the South Korean won added 0.2 percent against the greenback to Won939.60, an eight-year high.
US dollar weaker on European data
May 2, 2006
The US dollar was down on Tuesday after new economic data from the UK and the Eurozone provided boosts for the currencies of those nations.
The greenback was down 0.6 percent to $1.2647 versus the euro, lost 0.8 percent to $1.84 in relation to sterling, and dropped 0.2 percent to ¥113.22 versus the yen. The US currency also lost 0.6 percent to C$1.1073 against the Canadian dollar, which was helped by the possibility of future interest rate hikes and rising prices for gold and crude oil.
Elsewhere in the world, the Australian dollar gained 0.6 percent to $0.7626 versus the US dollar and the South Korean won added 0.2 percent against the greenback to Won939.60, an eight-year high.
Dollar lower on investor concerns
May 1, 2006
With most foreign exchange markets closed for the May Day holiday - the major exceptions being the United States and Japan - the US dollar hit a year-long low in relation to the euro and was a low as it has been in seven months against the Japanese yen. Problems besetting the dollar include concerns over the huge budget and fiscal deficits in the US and the ongoing dispute with Iran over its nuclear program. The declines in the dollar came as investors were waiting for the release of new data on inflation, manufacturing, and personal income and spending in the United States.
The yen surged due to buying by foreign hedge funds and investment banks, adding 1 percent to ¥113.10 in relation to the US dollar. The euro gained 0.2 percent on the greenback, to $1.2626. Sterling was 0.5 percent higher versus the US dollar to $1.8269, while the Swiss franc was up by 0.4 percent against the dollar and the Canadian dollar was up 0.3 percent versus its US counterpart, to a 28-year high.
Advertisement
