The dollar turned negative against the Japanese yen and briefly extended losses against the euro on Wednesday after government data showed U.S. retail sales fell for a second straight month in May.
The euro rose as high as $1.2611 on Wednesday as investors trimmed very bearish positions on the single currency. But a three-notch downgrade of Spain’s credit ratings by Moody’s saw the short-covering come to an abrupt end.
Italy is due to sell up to 4.5 billion Euros of bonds later today. The bond sale comes a day after the country’s one-year borrowing costs hit a six month high of 3.97 percent at a debt auction.
Sterling dipped against the euro on Wednesday as safe haven flows into the UK currency eased, and looked vulnerable against the dollar as investors awaited the outcome of Greek elections on the weekend.
US business inventories increased 0.4% in April 2012 at $1.575 tn from March levels, more than the forecasted 0.3%.US producer price index for finished goods fell a full 1% in May 2012, marking the largest drop since July 2009.
Germany’s borrowing cost rises marginally as average yield rose to 1.52% from 1.47%; country sold euro 4.04 bn from 10 year bond auction.
Euro-zone industrial production declined for the second consecutive month in April 2012. The index fell 0.8% in April 2012 after easing 0.1% in March 2012.
EURUSD (1.2556) Moody’s three-step downgrade of Spain late on Wednesday pushed the euro lower but it still managed to end the day with a gain on the dollar.
The downgrade, dealt out as Madrid takes on another 100-billion euros in debt from the European Union’s emergency fund to rescue its banks, sliced back nearly half of the currency’s one-cent gain on the greenback earlier in the day.
The euro was at $1.2556, compared to $1.2502 late on Tuesday.
The modest fall after Spain’s downgrade suggested that few were surprised by it.
The Great British Pound
GBPUSD (1.5558) Sterling dipped against the euro on Wednesday as safe haven flows into the UK currency eased, and looked vulnerable against the dollar as investors awaited the outcome of Greek elections on the weekend.
The common currency edged up 0.3 percent against the pound to 80.53 pence. It recovered from a two-week low of 80.11 pence hit on Tuesday when investors sought alternatives to the euro as Spanish bond yields rose.
Euro/sterling has been hemmed in a range roughly between 81.50 pence and a 3-1/2 year low of 79.50 pence since the start of May, and many market players said it was unlikely to break out before Sunday’s Greek vote.
Analysts said both the pound and the euro may come under pressure against the safe haven dollar however, on worries a win for anti-bailout parties in the Greek election could increase the possibility of the country leaving the common currency bloc.
Sterling fell 0.2 percent against the dollar to $1.5545, with resistance at the June 6 high of $1.5601.
Asian –Pacific Currency
USDJPY (79.46) The dollar turned negative against the Japanese yen and briefly extended losses against the euro on Wednesday after government data showed U.S. retail sales fell for a second straight month in May.
The dollar hit a session low of 79.44 yen after the data and last traded at 79.46, down 0.1 percent on the day.
The euro briefly rose as high as $1.2560 and last traded $1.2538, up 0.2 percent on the day, according to Reuters data.
Gold (1619.40) has moved slightly higher on a weaker US dollar, though euro-zone worries reined in the rise of gold prices as investors turned to Treasury’s for security.
The most actively traded contract, for August delivery, on Wednesday gained 0.4 per cent, or $US5.60, to settle at $US1,619.40 per troy ounce on the Comex division of the New York Mercantile Exchange.
Gold prices have edged higher as the US dollar has drifted lower against the euro in recent days. The euro has drawn strength from Spain’s bailout plan, which soothed some of the concerns about the country’s ailing bank sector.
US dollar-denominated gold is more affordable to traders using foreign currencies when the dollar weakens.
Disappointing US economic data released Wednesday showed lower wholesale prices and weaker retail sales in May, indicating to some investors that another round of monetary easing may be announced.
Crude Oil (82.62) prices have slipped on the eve of an OPEC meeting that could prove contentious, with the cartel divided over whether to cut output to stem a steep fall in prices in recent months.
New York’s main contract, light sweet crude for delivery in July, fell 70 US cents to close at $US82.62 a barrel, its lowest level since early October.
In London trade, Brent North Sea crude for July settled at $US97.13, down just one US cent and hitting a fresh low since late January.
Ministers of the Organization of the Petroleum Exporting Countries, which supplies about one third of global oil, are slated to meet in Vienna on Thursday to confront crude prices that have plunged roughly 25 per cent since March.