NS: Dollar rises against most major currencies in past week
NEW YORK, Nov. 20 (Xinhua) -- The dollar rose against most major currencies in the past week amid comments from top U.S. and euro zone economic officials, and weak economic reports.
With risk sentiment remaining the main driving force in currency trading, the dollar tends to fall against the euro and other higher-yielding currencies on positive economic news, and to rise when investors worry about economic outlook.
U.S. Federal Reserve Chairman Ben Bernanke said on Monday that the central bank would monitor the sliding U.S. dollar and reiterated that interest rate would be kept at low levels for a while.
"We are attentive to the implications of changes in the value of the dollar and will continue to formulate policy to guard against risks to our dual mandate to foster both maximum employment and price stability," Bernanke said in remarks to the Economic Club of New York.
The Federal Open Market Committee continued to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period, Bernanke said, repeating a pledge made at the central bank's latest monetary policy meeting.
The dollar traded lower on Monday as investors questioned Bernanke's ability to ensure policies to support the dollar as the Fed is expected to keep benchmark rates at near zero range well into 2010 to nurture the economic recovery.
But the greenback regained momentum on Tuesday as European Central Bank president Jean-Claude Trichet supported Bernanke on the strong-dollar policy.
Trichet said that Bernanke's comments on the dollar were "very important." "I believe that the strength of the dollar within the set of floating currencies is in the interest not only of the United States, but of the entire international community," he said.
Eurogroup chairman Jean-Claude Juncker said Trichet was "perfectly right" to highlight Bernanke's comments. "We think, like our American friends, that the strong dollar is in the interest of the U.S. economy," said the head of the group of euro zone finance ministers.
Some major U.S. economic reports released during the week were weaker than expected, adding to worries that U.S. economic growth could be slow in 2010.
Industrial Production rose a mere 0.1 percent in October, according to the Fed. The September rise was revised down from 0.7percent to 0.6 percent. Capacity utilization for total industry moved up 0.2 percentage point to 70.7 percent in October.
Manufacturing production moved down 0.1 percent, after a rise of 0.8 percent in September. This was the first drop in manufacturing production since June. With the end of the 'cash for clunkers' program, auto output fell 1.7 percent in October, compared with an 8.1 percent rise in the previous month.
U.S. housing starts plunged 10.6 percent in October to an seasonally-adjusted annual rate of 529,000, the Commerce Department reported. Single-family starts fell 6.8 percent. Multi-family starts plunged 34.6 percent to its lowest level since data collection began in 1959.
Building permits, a forward-looking indicator for future housing starts, fell 4.0 percent, with single-family permits down 0.2 percent.
The recent flattening in single-family starts and permits is payback for the first-time homeowners tax credit which shifted housing starts and permits from 2010 and late 2009 into the first seven months of 2009.
Builders chose to be cautious in October, as the tax credit program was due to expire at the end of November. The program was extended and expanded on Nov. 6. It was expected that tax credit, job growth and low inventory levels of new homes will result in sustained increases in housing starts in 2010.
The delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 9.64 percent of all loans outstanding as of the end of the third quarter of 2009, the Mortgage Bankers Association reported on Thursday. It was the highest level since data collection began in 1972.
The percentage of loans in the foreclosure process reached a record high of 4.47 percent at the end of the third quarter.
Delinquency and foreclosure rates will continue to climb before going down due to high unemployment, the association said. A lot of potential foreclosed homes are coming into the market next year, pushing more downward pressure on home prices.
Initial claims for unemployment benefits were unchanged at 505,000 last week, according to the Labor Department. Both four-week average initial claims and continuing claims continued to fall, an indication of slow improvement of the labor market.
The Conference Board's Leading Economic Index rose 0.3 percent in October for the seventh straight month, an increase smaller than expected. The forward-looking index suggested that economic activity will continue to grow over the next few months, at a slowpace though.
The dollar was also bolstered by a report showing that foreign investors' appetite for U.S. securities remained strong. Net foreign purchases of long-term securities rose to 40.7 billion dollars in September, the fourth straight month of positive net inflows, the U.S. Treasury reported. Net buying of U.S. Treasury bonds and notes by foreigners increased to 44.7 billion dollars after a net acquisition of 28.0 billion dollars in August.
Investors are waiting for a series of new data due next week for trading clues. The U.S. Commerce Department will releases its second estimate for third-quarter GDP on Tuesday.
In the initial report released in late October, it was estimated that U.S. economy expanded at an annualized rate of 3.5 percent in the third quarter. But some economic data since then showed that some sectors in the economy were not as good as expected. Analysts expect that the growth rate would be revised down to 2.5 percent to 3 percent in the second estimate.
The euro bought 1.4857 dollars in late Friday New York trading, about 0.2 percent lower than a week ago. The British pound fell 1.1 percent to 1.6487 dollars. The dollar rose 1.9 percent during the past week to 1.0714 Canadian dollars, and rose 0.5 percent to 1.0182 Swiss francs. It fell 0.7 percent to 88.96 Japanese yen.
