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Dollar Attempting To Recover After Positive Economic Reports


The dollar is attempting to recover from early losses against all of its major competitors on Wednesday, after the release of some strong economic results. Investors are continuing to watch Federal Reserve Chairman Ben Bernanke during his second day of testimony today, this time before the House Financial Services Committee.

Bernanke downplayed speculation that the central bank is getting ready to end its controversial quantitative easing program on Tuesday. In semi-annual testimony before the U.S. Senate Banking Committee, Bernanke said the Fed's $85 billion/month asset-buying program is needed to preserve a nascent housing recovery and modest improvement in the jobs market.

While the Commerce Department released a report on Wednesday showing that new orders for U.S. manufactured durable goods fell by more than expected in the month of January, orders actually rose by much more than expected when excluding orders for transportation equipment.

The report said durable goods orders tumbled by 5.2 percent in January after jumping by a revised 3.7 percent in December. Economists had expected orders to fall by 4.0 percent compared to the 4.3 percent increase that had been reported for the previous month.

Pending home sales in the U.S. rebounded by more than expected in the month of January, according to a report released by the National Association of Realtors on Wednesday. NAR said its pending home sales index rose by 4.5 percent to 105.9 in January after falling by 1.9 percent to 101.3 in December. Economists had expected the index to increase by 3.0 percent.

Italy's borrowing costs surged at a bond auction on Wednesday as the inconclusive election results led to concerns that political instability could derail the country's efforts to tackle its huge debt and help the economy out of a recession.

The Rome-based Treasury sold EUR 4 billion of 10-year bonds, in line with the target set for the sale, which saw the cost of borrowing soar to a four-month high despite strong demand.

The yield on the May 2023 bond rose to 4.83 percent from 4.17 percent fetched at a January 30 sale. The yield is the highest since October last year. The bid-to-cover ratio, which reflects investor demand, climbed to 1.65 from 1.32.

The agency also sold EUR 2.5 billion of 5-year bonds, matching the maximum target set for the sale. The November 2017 bond fetched a yield of 3.59 percent, which was much higher than the 2.94 percent paid on January 30. The demand was 1.61 times the offer compared to 1.30 times at the previous sale.

The dollar has been losing ground gradually against the Euro on Wednesday, pulling back from an early high of $1.3041 to around $1.3100.

Eurozone economic confidence climbed to a 9-month high in February by the virtue of its fourth consecutive monthly improvement, boosting expectations of a trend reversal in the bloc. Nevertheless, inconclusive Italian election remains a potential risk.

The economic sentiment index came in at 91.1, up from a revised 89.5 in the prior month and was also above the consensus forecast of 89.9, the results of a survey by the European Commission showed Wednesday.

A leading indicator of the Eurozone economy increased for the third consecutive month in January, indicating that stabilizing financial conditions are having a positive effect on the economic outlook, preliminary data from a survey by the Conference Board showed Wednesday.

The leading economic index increased 1 percent month-on-month to 106.2 in January, after rising 0.3 percent in December and 0.6 percent in the month prior to that.

Confidence among German households is set to improve for the second straight month in March, with expectations turning more optimistic as the financial crisis in the euro area is calming down, fueling hopes that recovery will gather momentum in the early months of the year, a monthly survey revealed Wednesday.

The results of a forward-looking survey by the GfK showed that the consumer confidence index based on the survey will rise to 5.9 in March from 5.8 in February, marking the second consecutive monthly growth. The projected figure matched economists' forecast.

German import prices declined for the first time in three years in January, data from the Federal Statistical Office showed Wednesday. The import price index fell 0.8 percent year-on-year in January, following a 0.3 percent increase in the previous month. Economists expected a 0.4 percent decline.

Confidence among French consumers remained unchanged in February, data from the statistical office Insee showed Wednesday. The headline synthetic index scored 86 in February, unchanged from January and December. The index reading was in line with economists' forecast but remained below its long term average.

Unemployment in France increased further in January, the latest figures from the labor ministry showed Tuesday. The number of job seekers in class A totaled 3,169,300 last month. This represented an increase of 1.4 percent or 43,900 workers compared to December 2012. Year-on-year, the number of job seekers in this category rose 10.7 percent.

The greenback dropped to a low of $1.5187 against the pound sterling on Wednesday, but has since bounced back to around $1.5135.

The British economy contracted 0.3 percent quarter-on-quarter in the fourth quarter, unrevised from the previous estimate, the latest figures from the Office for National Statistics showed Wednesday. The third quarter GDP figures were revised up to show a 1 percent growth for the period compared to 0.9 percent growth reported initially.

Data released Wednesday by the Office for National Statistics showed that the U.K.'s index of services decreased marginally in December after staying flat in the previous month. The seasonally adjusted index of services decreased 0.4 percent month-on-month in December, while economists expected the index
to remain flat. In November, the index had stayed unchanged month-on-month.

The buck fell to a low of Y91.126 against the Japanese Yen on Wednesday, but has since rebounded to around Y91.850.

Retail sales in Japan were down 1.1 percent on year in January, the Ministry of Economy, Trade and Industry said on Wednesday, standing at 11.207 trillion yen. The headline figure beat forecasts for a 1.5 percent contraction following the 0.3 percent increase in December.

by RTTNews Staff Writer

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