Dollar Posting Modest Gains At The Start Of The New Trading Week

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The dollar is currently posting slight gains against all of its major competitors at the start of the new trading week. Equity markets are rebounding on Monday, following Friday's weaker than expected jobs report.

Portuguese Prime Minister Pedro Passos Coelho said on Sunday that the government will have to reduce spending on social security, health and education to meet its bailout conditions after the constitutional court ruled against some of the austerity measures announced in the budget.

New spending reduction plans are crucial for the country to retain the access to its EUR 78 billion EU-IMF aid package, but the government does not favor any tax increases.

The government is forced to find new sources of savings after the Constitutional Court last Friday struck down four out of the nine measures that include plan to cut public employee wages and retiree pensions, and reduction in unemployment benefits.

The ruling will reduce the planned savings of the government by EUR 1.3 billion. The court ruling is a blow to the government's efforts to improve financial position ahead of the completion of the seventh review of the aid plan.

Any delay in concluding the review will cut off the disbursement of EUR 2 billion from the troika - the European Commission, the European Central Bank and the International Monetary Fund.

The dollar has bounced back from a low of $1.3037 against the Euro on Monday, back to around $1.3010. The intraday low was right around the lowest level the currency reached on Friday.

Investor confidence in the euro area weakened for the second successive month in April, and at a significant pace, data released by the think-tank Sentix showed Monday. The index fell to -17.3 in April from -10.6 in the prior month. The latest figure was worse-than the expected level of -12.8.

Germany's industrial production rose more-than-expected in February, helped by an increase in manufacturing output, underpinning hopes that the biggest euro area economy is on the recovery path after shrinking in the final months of 2012, the latest data showed on Monday.

Industrial production advanced a seasonally and working-day adjusted 0.5 percent sequentially, reversing January's revised 0.6 percent decrease, the Economy Ministry said. Economists had expected production to grow by 0.3 percent in February, marking an improvement from January's originally reported flat level.

Standard & Poor's affirmed its AAA ratings for the U.K., but warned that there is at least a one-in-three chance of downgrade. The affirmation of ratings reflects that the government remains committed to implementing its fiscal program, and that it has the ability and willingness to respond rapidly to economic challenges.

The buck has also rebounded from Friday's low of $1.5362 against the pound on Monday, back to around $1.5260.

The British economy is unlikely to pick up momentum until the second half even as business sentiment improves with firms expecting an increase in employment, a survey by accountancy firm BDO LLP showed Monday.

The confidence index compiled by BDO, which measures expectations for the performance of businesses two quarters ahead, moved up to 92.2 in March from 90.6 in February. The index, however, remained below the 95 mark which separates growth from contraction.

The Bank of Japan's new stimulus measures, announced last week, continue to weaken the Yen. The central bank conducted its first government bond-buying operation today and said it will buy 1 trillion yen of Japanese government bonds with maturities of between five and 10 years, and 200 billion yen of bonds with maturities exceeding 10 years.

The greenback extended its gains against the Japanese Yen to a third consecutive session on Monday, reaching over a 3-year high of 99.033.

Japan posted a current account surplus of 637.4 billion yen in February, the Ministry of Finance said on Monday, bouncing into the green after three straight months of deficit. The headline figure topped forecasts for a surplus of 435.4 billion yen following the 364.8 billion yen deficit in January.

Japan's economy watchers' views of the current economic situation improved significantly in March, continuing the trend that started five months ago, data released by the Cabinet Office showed Friday. According to the Eco-Watchers' survey, the indicator reflecting assessment of the current economic situation compared to the previous three months rose to 57.3 in March from 53.2 in February, marking the fifth consecutive growth.

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