By Joe Manimbo of Travelex
The dollar steadied against most major currencies on Wednesday after posting broad losses the previous session. Still, the dollar kept near a two-month low against the single currency as overall market optimism remained largely positive following robust quarterly earnings from
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Greenback sentiment has taken a hit recently as hopes for a solid corporate earnings season have emboldened investors to re-establish positions in riskier currencies. As a result, more defensive plays in safe havens like the buck and the yen have become less popular.
Receding worries about the eurozone sovereign debt crisis, following a positive Greek government bond auction yesterday, coupled with expectations for softer U.S. economic growth during the second half of 2010, have further eroded dollar sentiment.
The pound rose to a two-month peak against the greenback overnight as better than expected U.K. employment data helped to ease concerns about the outlook for the U.K. economy.
The Canadian dollar held near a three-week high against the dollar, boosted by the elevated level of investor confidence and the greenback's overall softer tone.
The minutes from the
June meeting are due out this afternoon at 2 p.m. EDT. Should the minutes reinforce investor concerns about weaker U.S. growth for the remainder of the year, risk sentiment could ebb, a scenario that might renew demand for the safe-haven U.S. and Japanese currencies.
EUR: The euro eased slightly off the two-month peak it hit yesterday against the dollar, though the single currency remained biased toward the stronger end of its recent ranges. At one point during the overnight session, the euro rose to a three-week high against the Japanese yen.
Steady investor appetite for risky higher yields has provided Europe's common currency with key support. However, the euro is also drawing investor interest on its own accord. A reduction in worries about the sovereign debt crisis that has engulfed nations like Greece, Spain and Portugal has helped the euro to distance itself from last month's four-year low against the greenback.
The single currency is also benefiting from a shift in sentiment against the dollar on worries about the strength of the U.S. recovery. Overnight data from the 16-nation zone had minimal impact on the euro. Eurozone industrial production rose 0.9% month over month in May, which was weaker than the 1.2% investors had expected. Inflation in the 16-nation zone cooled modestly, with an unchanged reading in June, which was exactly as expected and below the 0.1% month-over-month increase in May.
: The pound rose to a two-month high against the dollar overnight on positive U.K. labor market data. The British claim count for jobless benefits fell by 20,800 in June, a little more than the 20,000 forecast. A broader survey of U.K. unemployment showed the that the IL0 jobless rate unexpectedly dipped to 7.8% in May, its lowest level in four months. Investors had expected an unemployment rate of 7.9% from the previous month's upwardly revised 8.0% reading. Overall, today's batch of British data helped to ease worries about the outlook for the economy and lifted the pound.
: The Australian dollar eased off yesterday's three-week high against the dollar on profit-taking and a decline in oil prices to below $77 a barrel. The recent rally underway on Wall Street has bolstered the risk-sensitive Australian currency. Positive local economic data have also played favorably into the Aussie's overall upbeat tone. Wednesday data showed that Australian consumer confidence rebounded in July, rising 11.1% from the near-6% decline the previous month.
: U.S. retail sales fell by a larger-than-expected 0.5% month over month in June -- a weak number that was below the forecast for a 0.2% decline. Still, it was a smaller decline than the 1.1% drop in May.
Core consumer inflation, which excludes volatile food and energy prices declined by 0.1% month over month in June after the 1.2% month-over-month fall in May. Investors had expected an unchanged reading of core consumer inflation in June.
The cooler-than-expected inflation data reinforce views that the U.S. Federal Reserve has ample scope to keep rates low for quite a while to aid the recovery. Such a dollar-negative scenario hurts the buck and underscored its fall following the data.
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