Speculation that US reports tomorrow will show a slump in home prices accelerated and that consumers were the most pessimistic in 15 years, helped to push the Dollar down
The Dollar traded near a one-month low against a basket of major currencies in the early trading, after falling last week on concerns that hiking oil prices could further slow the US economy and add to inflation pressures. Also, . The US currency traded at 1.5764 against the Euro at 7:00am GMT. “The dollar will keep sliding amid the slowing U.S. economy”, said Michiyoshi Kato, a senior vice president of currency sales in Tokyo at Mizuho Corporate Bank Ltd. “Weaker data will force the Federal Reserve to lower interest rates further.”
After a fall in Tokyo stocks prompted investors to unwind risky carry trades, the Dollar fell against the Yen. The US currency traded at 103.28 against the Yen at 8:00am GMT. In carry trades, low-yielding currencies, such as the Yen, are used to finance purchases of assets offering higher returns elsewhere.
The Euro may be supported on speculation that the 15 nations that share the currency may be strong enough to withstand a slowdown in the US economy, allowing the European Central Bank to keep interest rates on hold at 4%, to fight inflation. The Euro traded at 162.91 against the Yen at 8:00am GMT.
The Dollar fell versus the Canadian Dollar and held near a 25-year low against the Australian Dollar after the rising trend in the commodities prices, improving the outlook for that country’s exporters. The US currency traded at 0.9873 against the Canadian Dollar and at 0.9613 against the Australian Dollar at 8:00am GMT.
In a very poor day in terms of economical data, since stock markets are closed in the US and in the UK due to national holidays, investors will be paying attention to the release of CSPI y/y in Japan, which is expected to increase, having a positive effect on the nation's currency because when businesses pay more for services, they are likely to pass the higher costs to the consumer. Also, later today the Reserve of Bank of New Zealand will reveal Inflation Expectations, which is forecasted to increase, having a positive impact in the currency.
Finotec Analysis Team
26 May 2008