The U.S. dollar regained some of its footing after falling yesterday in reaction to the
that struck a subdued tone on the outlook for growth in the world's largest economy.
The U.S. central bank also signaled Wednesday that it intends to keep its benchmark lending rate ultra-low for "an extended period," a duration many market watchers believe to be about six months. The dollar initially fell on the U.S. central bank's downgraded assessment of the recovery and the low-rate outlook. However, the greenback recovered some of its Fed-induced losses during European trading overnight on worries about the outlook for the global economy, which sent investors toward traditional places of safety such as the dollar and the yen.
Though firmer against the euro and some of its riskier rivals like the Australian and Canadian currencies, the buck slide to one-month lows against the Japanese currency and to a six-week low against sterling. For the latest on the U.S. economy, investors today will study data on durable goods orders and weekly jobless claims. Disappointing results, which are expected for the durable goods report, would likely further drag on market confidence and support the dollar's safe-haven status.
The Canadian dollar declined broadly on Thursday, hurt mostly by the reduction in risk sentiment, which weighed on oil prices now down about 0.3% to $76 a barrel.
: The euro fell broadly on Thursday, hitting a 1-1/2-year low against sterling, while it neared a record low against the Swiss franc. Familiar themes are gnawing at the common currency, which include the market's overall distaste for risk, given concerns about the outlook for the world economy following the Fed's subdued assessment of the globe's biggest economy.
Renewed worries about the bloc's sovereign debt crisis are weighing on the single currency as the cost of insuring against a Greek debt default rose to a record high on Thursday. Investors use the yield on Greek bonds as a gauge of how confident they are in the nation's ability to manage its debt load. The euro was also hampered by data that showed eurozone industrial orders rose a less-than-expected 0.9%(month to month) in April, below both the 1.6%(month to month) forecast and the prior month's 5.1%(month to month) reading.
: The British pound remained one of the week's top performing major currencies, notching a 6-week high against the greenback and a November 2008 peak against the Europe's common currency. Sterling sentiment this week has been bolstered by the new U.K. government's budget, which markets largely viewed as being aggressive enough to get its pile of debt under control. Hopes that the U.K. is on the financial road to recovery contrasted the deep debt concerns in the euro zone, offering the pound broad support.
: The Australian dollar ended a mixed overnight session broadly lower against its U.S. counterpart as the market's overall cautious stance toward riskier assets weighed on the Aussie buck. Australia overnight got a new Prime Minister, Julia Gillard, who replaced Kevin Rudd in a move inspired partly to better the odds of the nation's ruling Labor Party winning an election later this year.
The Aussie initially rose on the news, though it ceded some ground as European stocks turned negative, fueling a bout of investor risk aversion in which riskier, higher-yielding assets tend to come under selling pressure.
: U.S. durable goods orders (i.e., products like cars and refrigerators that are intended to last for several years) declined by 1.1%(month to month) in May, which was slightly better than the 1.4%(month to month) drop investors had expected. The prior month was revised upward to 3.0%(month to month) from 2.8%(month to month).
The gauge on non-defense capital goods ex-aircraft -- a key measure on business spending -- rose 2.1%(month to month) in May, which was nearly double the 1.2%(month to month) consensus forecast.
Weekly jobless claims fell by 19,000 to 457,000
in the latest week, its biggest weekly improvement since April 17. Also encouraging, the four-week moving average, viewed as a better gauge of overall labor market trends, improved modestly.
Risk sentiment picked up on both reports, which suggested the fragile U.S. recovery remained on track. Consequently, the dollar firmed against the yen but it pared some of its gains against the euro and other risk-sensitive currencies like sterling and the Australian and Canadian dollars.
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