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US Dollar Slumps On Stock Market Rally

Wednesday during early deals, the US dollar slumped to new multi-month lows against the currencies of Europe, Switzerland and Japan as the stock markets in Asia-pacific and Europe rose today thus dampening demand for the safe-haven greenback and boosting higher yielding currencies.

In the upcoming session, the U.S. consumer price index for August is scheduled to be released at 8:30 am ET. The consensus estimates call for a 0.3% increase in the headline consumer price index and a 0.1% rise in the core consumer price index that excludes food and energy. The Treasury Department is due to release a report on the flows of financial instruments into and out of the U.S. for July at 9 am ET.

The industrial production report of the Federal Reserve is due out at 9:15 am ET. Economists estimate that industrial production rose 0.7% in August, while capacity utilization is expected to come in at 69.1%. at 10:30 am ET, the Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended September 11th.

The National Association of Homebuilders is scheduled to release the results of their survey on homebuilders' confidence at 1 pm ET.

Federal Reserve Bank Chairman Ben Bernanke said 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.

The greenback tumbled to its lowest point since December 18, 2008 against the euro during early deals on Wednesday. The dollar touched 1.4714 versus the euro and this may be compared to Tuesday's New York session closing value of 1.4659. On the downside, the next likely target for the greenback is seen around the 1.486 level.

The Eurostat said in a final report that Eurozone's consumer price index or CPI dropped 0.2% year-over-year in August, compared to the 0.7% fall in the previous month. The statistical office confirmed its preliminary estimate for inflation. A year ago, the CPI inflation was 3.8%.

The core inflation, which excludes food and energy prices, remained at 1.3% in August, unchanged from the previous month. On a monthly basis, the CPI increased 0.3% in August, while core inflation stood at 0.3%.

The US dollar pulled back against its UK counterpart after showing strength during today's Asian trading and the pair thus moved from 1.6435 to 1.6522. At Tuesday's close, the pair was quoted at 1.6491. If the dollar slides further, 1.669 is seen as the next likely target level.

The Labor Market Statistics from the Office for National Statistics showed that the UK claimant count rate in August was 5% of the workforce, up from 4.9% in July. The rate matched the consensus forecast. The number of people claiming Jobseeker's Allowance benefit increased 24,400 to 1.61 million. Economists were looking for a monthly increase of 25,000.

In the three months to July, the unemployment rate was 7.9%, slightly smaller than the expected 8%. The unemployment level stood at 2.47 million, up 210,000 from the previous three months.

Against the yen, the dollar slipped to a new multi-month low of 90.14 during Wednesday's early trading. The next downside target level for the dollar-yen pair is seen around the 89.2 level. The dollar was worth 91.04 against the yen at Tuesday's New York session close.

The Bank of Japan is scheduled to open its two-day monetary policy meeting today. The bank will announce its decision on interest rates on Thursday following the meeting, with analysts widely expecting the bank to keep rates on hold at a record low 0.10 percent.

Against its Swiss counterpart, the dollar declined to a 13 1/2 -month low of 1.0320 during today's early trading and 1.01 is seen as the next likely target level. At yesterday's New York session close, the dollar-franc pair was quoted at 1.0351.

Switzerland's real turnover in the retail sector rose 1% year-on-year in July, the Federal Statistical Office said Wednesday. Economists had expected an increase of 0.7%. In June, retail sales rose 0.9%.

In nominal terms, turnover grew 1.1% in July over the previous year. Real turnover per sales day rose 0.6% annually in the first seven months of the year and nominal turnover went up by 0.9%.

by RTTNews Staff Writer

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