The dollar slumped to new multi-month lows against the currencies of U.K., Europe and Japan in early European deals on Tuesday on speculation the U.S. interest rates will stay low.
Federal Reserve Chairman Ben Bernanke said Monday that though conditions have become less supportive of economic growth in recent months, the U.S. economy should still expand at a moderate pace.
The U.S. still has a "considerable" way to go before a full recovery is achieved, Bernanke told a meeting of the Southern Legislative Conference in Charleston, South Carolina.
Bernanke cited weak recovery in the labor market as a main reason for the sluggish economy, and pointed out that it has been a restraint on household spending.
Bernanke's remarks come about a week after St. Louis Fed President James Bullard said the Fed should think about buying more Treasury securities instead of promising to keep interest rates low for an "extended period" if prices fall as the economy slows.
Mixed trading was witnessed among the markets in Asia today, as most of the traders preferred to lock in profits from recent gains and moved to sidelines awaiting more cues on global economy. While the markets in China, Indonesia and Singapore ended in negative territory, the markets in Australia, Hong Kong, India, Japan, South Korea, and Taiwan ended in positive territory with modest gains.
Mixed trading is also being witnessed across the European markets on profit taking. Germany's DAX is presently gaining by 0.2%, while France's CAC 40 and U.K.'s FTSE 100 indexes are falling by 0.2% each.
The dollar that climbed to 1.3148 against the euro at 2:20 am ET Tuesday weakened thereafter. Presently, the dollar is trading at a 3-month low of 1.326 against the euro, compared to Monday's closing value of 1.3179. On the downside, 1.340 is seen as the next target level for the dollar.
Eurozone producer prices rose at a pace of 3% year-on-year in June, slightly slower than the 3.1% increase seen in May, the Eurostat said today. Economists had expected the annual rate to stay at 3.1% in June.
On a monthly basis, producer prices moved up 0.3% in June, unchanged from last month's growth. Consensus forecast was for 0.4% rise.
The dollar fell to a 6-month low of 1.5966 against the pound at 4:20 am ET Tuesday. Although the dollar recovered thereafter as the pound eased on weak U.K. construction PMI report, it slipped again shortly. As of now, the dollar is worth 1.5960 per pound. If the dollar drops further, it may likely target the 1.646 level. At yesterday's close, the pound-dollar pair was quoted at 1.5891.
An indicator of health in the British construction sector fell in July, suggesting the rate of expansion in the sector may have already peaked. Growth remained solid, however, supported by a further increase in new work.
The Markit / Chartered Institute of Purchasing & Supply construction purchasing managers' index slid to 54.1 from 58.4 in June.
The dollar plummeted to 85.80 against the yen at 6:40 am ET Tuesday, its lowest level since November 27, 2009. Since then, the dollar-yen pair has been moving sideways and is now worth 85.96. The next downside target level for the US currency is seen at 84.8. The pair closed yesterday's North American session at 86.51.
The dollar weakened against the Swiss franc after reaching a high of 1.0416 at 2:15 am ET Tuesday. The dollar-franc pair that closed yesterday's trading at 1.0393 is presently worth 1.0358 with 1.014 seen as the next downside target level.
Consumer prices dipped 0.7% month-on-month, bigger than the 0.4% decrease seen in June and 0.1% fall in May. Economists had expected only 0.5% decline. Annual inflation, at the same time, eased unexpectedly to 0.4% in July from 0.5% in June. Consensus forecast was for 0.7%.
Traders are now likely to focus on the North American session, in which the U.S. personal income and spending, factory goods orders and pending home sales - all for the month of June are slated for release.
For comments and feedback: editorial@rttnews.com