By Joe Manimbo of Travelex
The dollar extended its recent slide against the euro and a basket of six major currencies.
The currency was hurt by U.S. economic data Thursday morning that were mostly unfavorable after suffering losses Wednesday from dovish minutes from the
most recent policy meeting.
The greenback's overnight losses were broad-based, with the U.S. currency falling to a one-week low against the yen.
On Wednesday, the Fed minutes showed a central bank ready to step in to offer additional support to the economy but only if conditions take a big turn for the worse. The minutes also included more modest projections for growth, unemployment and inflation. Overall, the Fed minutes from its June meeting reinforced the central bank's low rate outlook, hurting the dollar's yield appeal.
Already benefiting from a broadly weaker greenback, euro sentiment was further bolstered after Spain's government bond auction received solid buying interest, which helped to diminish concerns about the bloc's debt crisis.
The Canadian dollar and other growth-sensitive currencies rose against the dollar but by a smaller degree compared with other major currencies. Weaker-than-expected second-quarter growth out of China weighed a bit on commodity-based currencies such as the Aussie, kiwi and Canadian dollars.
U.S. weekly jobless claims fell more than expected
in the latest week, declining by 29,000 to 429,000, the lowest level for jobless claims since August 2008 and the largest weekly decline since February 2010.
Analysts had forecast the claims figure to come in at 450,000 in the latest period.
Meanwhile, the U.S. producer price index fell by a larger-than-expected 0.5% month over month in June, which marked the third straight month that wholesale inflation has declined. Investors had expected the PPI to decline by 0.1% last month.
Excluding volatile food and energy costs, the PPI matched expectations with an increase of 0.1%.
The New York Fed's Empire State manufacturing survey plunged to a December 2009 low of 5.08 in July, well below of the 18.50 consensus forecast. The index is one of the early monthly barometers to U.S. factory conditions.
Overall, Thursday's U.S. data were mostly unfavorable and increased the dollar's headwinds. The greenback fell to fresh session lows nearly across the board following the data.
: The euro continued to inch upward against its U.S. rival, hitting its strongest level since May 10. The single currency has been one of the chief beneficiaries of the buck's turn in sentiment.
As in recent sessions, the euro overnight got a boost after a government bond auction -- this time in Spain -- garnered solid investor interest and demand. The well-received Spanish auction of nearly 3 billion euros helped to demonstrate that debt-crippled nations in the bloc could raise cash independently rather than having to turn to the European Central Bank.
Despite the single currency's steady rise off the four-year low it had touched in June, most investors see strong downside risk to the euro. A key near-term hurdle for the single currency will be next week's bank stress tests, which should help gauge the durability of financial institutions in the region. The bank stress tests are expected to cover banks in the 16-nation eurozone as well as in the U.K., Sweden and Denmark.
: China, the world's third-largest economy, reported cooler-than-expected growth during the quarter ending June 30. China's GDP grew at a still torrid 10.3% annual rate in the second quarter, below the 10.5% increase that market watchers had expected.
The Chinese economy in the first quarter reported growth of 11.9%. Market participants expected a softening rate of growth in China to persist over the coming months, partly the result of a reduction in government stimulus measures to spur the economy. The prospect of slower Chinese growth weighed on the commodity-linked currencies of Australia, New Zealand and Canada. Their economies rely on exports to China.
: Canadian manufacturing sales rose by 0.4% month over month in May, better than the 0.2% forecast. The positive data should help to cement expectations for a 25-basis-point rate hike to 0.75% by the Bank of Canada Tuesday, July 20.
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