NEWS / Foreign Exchange

The U.S. dollar dropped to an all-time low against the Euro

The  U.S. dollar dropped to an all-time low against the Euro on Friday after data showed the U.S. economy grew much less than expected in the first quarter, supporting the view that official interest rates are headed lower this year. Data showed the U.S. economy grew 1.3 percent, the softest pace in four years, hurt by weaker exports and a steady slide in spending on homebuilding. While America??™s Federal Reserve is expected to cut rates to support growth, higher rates are forecast in major economies such as the euro zone and Britain, which is encouraging investors to sell the dollar.
       
The British pound rallied above $1.99 against the dollar on Friday, regaining some of the ground lost on Thursday during a broad US dollar rally. Sterling gained support from some central bank selling of dollars and corporate buying of sterling for dividend payments, as well as overall negative sentiment on the greenback.
   
The Japanese yen strengthened against the dollar on the back of weak US growth numbers.  The Asian currency dipped to a record low versus the euro after a larger-than-expected drop in Japan's core consumer prices. Overt yen losses have consistently proved short lived however, as exporters enter yen supportive carry positions ahead of "Golden Week" holidays next week. Comments from Bank of Japan governor Toshihiko Fukui that the BOJ may need to adjust interest rates despite near-term weakness in prices also supported the currency.
  
The Canadian dollar gained back recent concessions it made to the US dollar this morning, as US growth data drove the dollar lower across the board.  In other news, a notice that central bank governor David Dodge will not seek a second term raised questions about who might replace him.  Increasing attention was being paid to how Canada??™s central bank views signs of rising inflation and the strength of the Canadian dollar. Strong commodity prices and higher-than-expected jobs and inflation data have driven the Canadian currency higher over the past two months, as the market has trimmed its past expectations of interest rate cuts.
 
The Australian dollar drifted off its recent high but firmed against a broadly weaker U.S. dollar on views that the global growth outlook remains strong despite lackluster growth data in the United States. Australia is in its 16th consecutive year of growth, unemployment remains at a three-decade low and the country's minerals are in hot demand to feed China's booming economy.
    
The Mexican peso weakened and government bond prices dipped on Friday ahead of the central bank's monthly monetary policy decision. Investors broadly expect the central bank will keep the overnight interest rate steady at 7 percent, so market attention will center on the bank's choice of words on inflation and its rate outlook.

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