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Dollar Attempting To Recover From Yesterday's Losses

Dollar Attempting To Recover From Yesterday's Losses
9/21/2012 12:43 PM ET

The dollar is attempting to rebound at the end of the trading week, from the weakness of the previous trading session. The weekly jobless claims data was one of the main causes of yesterday's decline, after the number of claims came in above expectations.

The Spanish government and the European Commission are in talks over measures that would be demanded by creditors if the country places an official bailout request, Financial Times reported Thursday citing unnamed officials involved in discussions.

According to the newspaper, the plan will be unveiled next Thursday and will focus on structural reforms rather than new taxes and spending cuts. Discussions between the Greece government and international creditors to fix a deal on EUR 11.5 billion spending reduction reached no clear conclusion late Thursday.

But some progress has been made on lifting the retirement age and pension cuts, which would together contribute a saving of EUR 9.5 billion. A final deal is crucial for Greece to receive a EUR 31.5 billion in aid.

Officials from the European Commission, the International Monetary Fund and the European Central Bank, collectively known as the troika, will leave Athens this weekend. The troika mission is set to come back next week again to finalize the terms if it is not resolved soon.

The Italian government on Thursday slashed the economy's growth forecasts, while sharply hiking its budget deficit targets.

The government led by Prime Minister Mario Monti now forecasts the economy to contract 2.4 percent this year, double the April projection of 1.2 percent contraction.

The recession is forecast to continue in 2013 with the gross domestic product shrinking 0.2 percent, in contrast to the previous projection of 0.5 percent growth.

Rome, meanwhile, hiked its prediction for budget deficit this year to 2.6 percent of GDP from 1.7 percent projected in April. The deficit target for 2013 was lifted to 1.8 percent of GDP from 0.5 percent.

The dollar reached an early low of $1.3047 versus the Euro Friday, but has since rebounded to around $1.2990.

A leading indicator of the German economy increased moderately in July, after falling for four consecutive months, indicating that economic activity will continue to expand in the near term, though at a slower rate, data from a survey by the Conference Board showed Friday.

The leading economic index edged up 0.1 percent from the previous month to 102.6 in July, recovering from decreases seen in the previous four months. The rebound in the index reflected large positive contributions from stock prices and new residential construction orders, which more than offset the negative contribution from consumer confidence.

The British economy may start recovering towards the end of this year and into next year, Bank of England Chief Economist Spencer Dale told BBC Radio Lincolnshire on Friday. There is "a light at the end of the tunnel" for the economy and this is "an uncertain light," he said.

In an interview to Channel 4 television on Thursday, Bank of England Governor Mervyn King said the U.K. is likely to experience a slow recovery. He also said that it is "acceptable" for the UK to miss debt target given the weak growth.

The greenback dropped to a 5-month low of $1.6309 versus the pound sterling early Friday, but has since climbed back to around $1.6240.

The U.K. logged the biggest budget deficit for the month of August as benefit payments increased and corporation tax receipts declined, data from the Office for National Statistics showed Friday.

Excluding intervention, public sector net borrowing was GBP 14.4 billion in August, which was equal to the net borrowing in August 2011. Nonetheless, the deficit was slightly below the GBP 15 billion shortfall forecast by economists.

UK's house price sentiment continued to remain weak, with households reporting decline in prices for the twenty-seventh consecutive month in September, though at a slower rate, data from a survey by Markit Economics and Knight Frank showed Friday.

The house price sentiment index came in at 46.8 in September, up from 44.5 recorded in August. The latest reading indicated the slowest decrease in prices since July 2010.

The buck has remained relatively flat in comparison to the Japanese Yen on Friday, hovering around the Y78.175 level.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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