The euro, which had traded above $1.37 against the US dollar in early Feb, dropped below the $1.32 level for the first time since Jan. 10, to trade at $1.3184, down from $1.3256. Expectations that the US Federal Reserve may stop providing monetary stimulus also helped the dollar gain broadly.
A surprisingly weak Eurozone Purchasing Managers Index (PMI) data for February dashed hopes of an early recovery for the recession-hit region. Against the yen, the euro fell to 122.23, its weakest since late January. It was last at 123.03, down 1%. However JPY has shown some improvement against the US dollar, and has pushed below the 93 level. According to the IMF, concerns over the depreciation of the Japanese yen are overstated and the Bank of Japan should act with more resolve to escape deflation that has long plagued its economy.
The dollar pared gains against major rivals after a US regional manufacturing gauge for February unexpectedly turned negative. Markit’s manufacturing activity gauge for the US showed a slower expansion this month because of weaker new orders and employment.
The ICE dollar index, a measure of the Greenback’s moves against a basket of six major global currencies, was at 81.235 in the wake of report showing manufacturing activity in the mid-Atlantic area fell to -12.5 from -5.8 in January.
The number of US workers filing new applications for unemployment benefits jumped last week, a reminder of the labour market’s painfully slow recovery. Initial jobless claims, a measure of lay-off, increased by 20,000 to a seasonally adjusted 362,000 in the week ended Feb. 16, according to the Labour Department.
US home resale’s edged higher in January and left the supply of homes at its lowest level in 13 years, a sign that steam is gathering in the US housing market. The National Association of Realtors said on Thursday that existing home sales rose 0.4% last month to a seasonally adjusted annual rate of 4.92 million units.
The Swiss franc tracked the euro lower against the safe-haven dollar after news the Federal Reserve might slow or stop its stimulus programmes put a lid on risk sentiment. The franc, which has often traded in tandem with the euro since the Swiss National Bank capped it at 1.20 in September 2011, fell to a four-week low against the dollar after the Fed signaled it might stop bond purchases which have underpinned global appetite for risk assets.
The pound rose from a 15-month low against the euro and German bunds advanced after a report showed services and manufacturing in the 17-nation region shrank in February, boosting demand for safer assets. GBPEUR opened at 1.1454 and spiked to a high of 1.1581 but retraced its steps slightly during afternoon trading and is currently trading at 1.1532.
Against the US dollar sterling fell to its lowest level since July 2010 of 1.5140 after the Federal Reserve hinted it may slow the pace of its bond-buying program. However it has since it has been steadily climbing and reached a high of 1.5268.
The UK government recorded the biggest surplus on public finances for five years in January. The Office for National Statistics said the public sector made a net debt repayment of £11.4 billion in January, the largest net debt repayment since January 2008. In comparison, in January 2012 there was a net debt repayment of £6.4 billion.
BOE member David Miles yesterday called for at least an extra £175 billion of quantitative easing, which he believes will help bolster the economy.