The dollar continues to rise. This is the biggest weekly gain versus the yen since 2009 and added versus other main currencies, having surged after Federal Reserve Chairman Ben S. Bernanke outlined the case for U.S. stimulus to be withdrawn as the economy keeps improving.
The Federal Open Market Committee left the monthly pace of
bond purchases unchanged at $85 billion, saying that “downside risks to
the outlook for the economy and the labor market” have diminished.
Policy makers raised their growth forecasts for next year to a range of
3% to 3.5% and reduced their outlook for unemployment to as low as 6.5%.
Accordoing to experts' opinion, the Fed has more confidence
in the momentum of the economy, there’s more distance between us and
the financial crisis, and now is the right time to just start thinking
about the normalization of policy. It’s trying to change market
psychology to be more reliant on the real economy and on the outlook for
company earnings.
Investors also were absorbing remarks from St. Louis
Federal Reserve President James Bullard, who explained on Friday why he
voted against the latest Fed policy decision.
Bullard said the decision by the Federal Reserve to lay out
its plans to taper bond buys was badly timed. The Fed should have
waited “for more tangible signs” of economic improvement and a halt in
the downward direction for inflation.
A Bloomberg survey following the FOMC shows the consensus
estimate is for the Fed to begin tapering in September by cutting back
by $20B/month to $65B/month. The survey shows the consensus is for bond
buying to halt completely in June 2014.
US data showed existing U.S. home sales rose 4.2% to an
annual rate of 5.18 million in May, topping expectations for a pace of
around 5 million and the Philadelphia Fed’s manufacturing index came in
stronger than expected.
Earlier, data showed U.S. weekly jobless claims rose more
than expected. U.S. jobless claims for the week ended June 15 rose by
18,000 to a seasonally adjusted 354,000, more than expectations of a
rise to 340,000. The weaker-than-expected claims data gave more credence
for the oil selloff.
EURO
A rebound by the euro lost steam.
Greece has moved back into the spotlight, with talks among
the government’s coalition leaders stoking concerns over the durability
of the government due to controversy surrounding the closure of
state-run broadcaster ERT.
Greece’s Democratic Left party said it would pull out of
the coalition government amid disagreement with Prime Minister Antonis
Samaras’ abrupt decision to close the state broadcaster, ERT, last week.
Adding to worries about Greece, the International Monetary
Fund threatened to suspend aid payments to the struggling country,
unless euro-zone leaders move to plug a gap of 3 billion to 4 billion
euros ($4 billion to $5.3 billion) in the country’s rescue program. The
report said the gap stemmed from central banks refusing to roll over
Greek bonds and that Athens wasn’t to blame.
Also the Eurozone officials said they won’t revise Cyprus
bail out conditions after requests from the Cypriot President
Anastasiades yesterday for a complete revamp of the Eur 10 bln bailout,
where the country economy and banking system have been severely damaged,
by the conditions imposed on the island.
The purchasing manager’s indexes for the euro zone showed
the region’s downturn eased in June. The composite output PMI reading
climbed to a 15-month high of 48.9 from 47.7 in May, exceeding analyst
expectations. The manufacturing PMI rose to 48.7 from 48.3 in May,
marking the highest level in 16 months.
POUND
UK pound resumed bearish move. According to report, Public Sector Net Borrowing was £10.535B in May versus £6.623B in April.
Earlier the U.K. pound rose as retail sales including fuel rose by 2.1% last month after slipping by 1.3% in April.
The MPC minutes have shown once again the same voting
pattern to keep interest rate intact at 0.5%, 9-0, and 6-3 in favour of
leaving the asset purchase programme unchanged at £375 billion, with
King, Fisher and Miles advocating for an increase to £400 billion.
YEN
The yen sharply fell versus the US dollar.
Bank of Japan Governor Haruhiko Kuroda said on Wednesday
during a semi-annual parliamentary hearing in Tokyo that the central
bank would maintain its current monetary policy until a sharp change
occurs in the economy. Even though the situation of the economy remains
uncertain, the BoJ governor sees it starting to recover gradually in the
nearest future while financial markets return to stabilization.
COMMODITY CURRENCIES
LOONIE: The U.S. unit jumped 0.9% versus its
northern counterpart Canadian dollars after Canada reported
weaker-than-expected inflation and retail sales data.
The loonie surged through the 2013 high of C$1.0421 after
soft inflation data threatened to keep the Bank of Canada on the
sidelines longer. Inflation rose 0.7% in May from last year, short of
expectations for a 0.9% rise. The Canadian dollar has fallen for 6
consecutive days.
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