The Dollar Index surged, breaking its longest stretch of weekly losses in more than five years, as concern the global economic recovery is stumbling curbed investors’ appetite for higher-yielding assets.
The US currency rose against all 16 of its most-traded counterparts as data from Europe, China and America fuelled demand for safety. The euro fell against most major currencies, while the yen touched a 15-year high versus the dollar after the Federal Reserve said the recovery will be “more modest.” US producer prices rose in July, a report next week may show.
“With the economy expected to grow at a much slower rate, investors were looking for safe-haven buying,” said Dennis Cajigas, a senior market strategist at brokerage MF Global Holdings Ltd in Chicago. “It’s not just in the US, but around the world. We did see slower growth in China and Europe’s recovery is bifurcated. The dollar is taking precedence.”
The dollar strengthened 4.1 per cent, the most since May, to $1.2754 per euro yesterday in New York, from $1.3280 on August 6. The greenback rose 0.8 per cent to 86.20 yen, from 85.51 on August 6. It touched 84.73 yen on August 11, the weakest level since July 1995. The yen appreciated 3.2 per cent to 109.92 per euro, from 113.55 a week earlier.
The Dollar Index, which IntercontinentalExchange Inc uses to track the greenback against the currencies of six major trading partners, rose 3.1 per cent to 82.920. It fell for the past nine weeks, the longest losing period since the 11 weeks ended December 3, 2004.
US sales, prices
Sales at US retailers rose in July less than forecast and core consumer prices grew at a rate that matched the smallest year-over-year gain in 44 years, government reports showed on Friday.
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“The pace of economic recovery is likely to be more modest in the near term than had been anticipated,” the Federal Open Market Committee said in a policy statement on August 10.
The central bank left the target rate for overnight loans between banks in a range of zero to 0.25 per cent, where it’s been since December 2008, and said it will buy Treasuries with proceeds from its mortgage holdings to help bolster the economy.
“Obviously the headline has been twofold: the FOMC and US data coming out,” said Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut. “The global outlook was a little more uncertain, so the dollar has gotten more of a safe- haven bid.”
Sales at US retailers increased 0.4 per cent, Commerce Department data showed, compared with a 0.5 per cent gain forecast in a Bloomberg News survey. Consumer prices excluding food and energy increased 0.9 per cent in July from the year before, matching the smallest year-over-year gain since 1966, the Labor Department reported.
Chinese production
Chinese industrial production increased the least last month since August 2009, and England pared its growth outlook, other data showed this week. The economy of Greece, the nation whose budget problems triggered Europe’s sovereign-debt crisis, shrank for a seventh quarter and unemployment rose, two reports showed on Friday.
The euro fell below its 100-day moving average of $1.2809 on August 12. It touched $1.2750 on Friday, the lowest level since July 22.