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Dollar Weaker Across The Board After BoJ Adds Further Stimulus


The dollar has weakened versus its major rivals on Friday, following the announcement that the Bank of Japan decided to expand its monetary stimulus. The weaker than expected first quarter U.S. GDP report also weighed on the currency.

The Bank of Japan on Friday decided to add further monetary stimulus to the economy through enhanced purchases of the government bonds, stepping up its efforts to boost economic growth and fight deflation.

The central bank's Policy Board unanimously voted to increase the total size of its asset purchase program by JPY 5 trillion with some changes in its composition, which will take the total to JPY 70 trillion by end-2013.

The central bank noted that the risk of the European debt problem causing financial market turmoil has decreased and the U.S. economy has continued to recover at a moderate pace.

The greenback extended its losses against the Japanese Yen to a third day. The currency fell to Y80.373, its lowest level since April 17th. Prior to the recent slide, the dollar traded around Y81.55 on Tuesday.

Core consumer prices in Japan were up 0.2 percent on year in March, the Ministry of Internal Affairs and Communications said on Friday - beating forecasts for a gain of 0.1 percent, which would have been unchanged from the February reading.

Industrial production in Japan climbed a seasonally adjusted 1.0 percent on month in March, the Ministry of Economy, Trade and Industry said in Friday's preliminary reading - well shy of forecasts for an increase of 2.3 percent following the 1.6 percent contraction in February.

Retail sales in Japan were up 10.3 percent on year in March, the Ministry of Economy, Trade and Industry said on Friday, standing at 12.432 trillion yen. That beat forecasts for an increase of 10.0 percent following the 3.5 percent gain in February.

Japan's housing starts grew at a slower pace of 5 percent in March from a year ago, the Ministry of Land, Infrastructure, Transport and Tourism said Friday. Economists were expecting the annual rate to rise to 8.2 percent from 7.5 percent in February.

The dollar gave back yesterday's gains versus the Euro and slipped to a 3-week low of $1.3269.

Standard and Poor's downgraded Spanish credit ratings by two notches on Thursday saying that it expects further deterioration of the country's public finances amid economic contraction and the need to support banks. S&P said it is lowering the euro member's long-term and short-term sovereign credit ratings to 'BBB+/A-2' from 'A/A-1'. The outlook on the ratings is 'negative'.

German consumer sentiment is set to deteriorate next month as income expectations and the willingness to buy durables deteriorated on high fuel prices, a survey by the market research group GfK showed Friday. The forward-looking consumer confidence index dropped to 5.6 for May from a revised value of 5.8 in April. Economists had expected the index to remain stable in May at April's originally reported reading of 5.9.

A leading indicator of the Eurozone economy declined in March, after rising for two consecutive months, data from a survey by the Conference Board showed Friday. The leading economic index decreased 0.3 percent month-on-month to 105 in March. In February and January, the index moved up by 0.8 percent and 1 percent respectively.

The buck has continued to lose ground versus the pound sterling. The U.S. currency has dropped from around $1.5820 on April 15th to an 8-month low of $1.6279 today.

The rate of growth of the U.S. economy slowed more than expected in the first quarter of 2012, according to figures released by the Commerce Department on Friday. The initial estimate of first quarter GDP showed a 2.2 percent growth rate, down from the 3 percent growth seen in the final quarter of 2011. While most economists had expected the rate of growth to slow compared to the fourth quarter, many forecast a somewhat stronger 2.5 percent growth rate.

U.S. consumer sentiment in the month of April showed an unexpected improvement compared to the previous month, according to revised data released by Reuters and the University of Michigan on Friday. The report showed that the consumer sentiment index for April came in at 76.4 compared to the mid-month reading of 75.7. Economists had been expecting a much more modest upward revision to a reading of 75.8.

by RTTNews Staff Writer

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