The U.S currency dropped to its weakest level in 2010 against the Japanese Yen as signs the U.S. economic recovery is losing momentum supported speculation that the Federal Reserve will keep borrowing costs low for the rest of the year. The USD also declined versus the EUR for the first time since May as a gauge of U.S. consumer confidence dropped more than economists expected and corporate revenue missed analyst forecasts.
Economic News
USD - Dollar Weakens on Signs of Economic Slowdown
The U.S Dollar fell the most against the EUR in 14 months and dropped to the lowest level this year versus the Yen as economic reports added to evidence that the U.S. recovery is losing momentum.
The greenback touched a level weaker than $1.30 versus the European currency as minutes of the Federal Reserve meeting last month indicated policy makers trimmed their forecasts for growth.
On Friday, a private survey showed U.S. consumer sentimentweakened in early July to an 11-month low and capped a week which saw U.S. data on the softer side, raising questions about the sustainability of the U.S. recovery.
Investors are closely watching the USD/JPY for the possibility of the greenback dropping to a 15-year low by breaching the November 2009 trough of 84.00 yen. Analysts said with U.S. yields heading lower, the Dollar could break past support around its 7 month low of 86.25 yen in the next few days.
EUR - EUR May Erase Gains on Bank Stress Tests
The European currency rose for a 3rd straight week against the U.S Dollar ahead of partial results of stress tests on the region's banking system, which are due on July 23. The 16 nation currency has surpassed $1.30 on Friday for the first time since May and traded around $1.2950.
The EUR has rallied 8.9% versus the Dollar since reaching a 4 year low of $1.1877 on June 7 as concern eased that Europe's sovereign-debt crisis would undermine the region's economic recovery.
However, the EUR may reverse its recent advances against the U.S Dollar given the slim likelihood of a very positive surprise from European bank stress tests this Friday, analysts said. European regulators will be examining the strength of 91 banks to determine if they can survive potential losses on sovereign bond holdings. The European currency is unlikely to fall past $1.20 unless there is a major negative surprise given that U.S. economic growth shows signs of slowing down.
JPY - Yen Rises Towards Year's High
The Japanese Yen rose toward its strongest level this year against the U.S Dollar as signs the U.S. economy is losing momentum added to speculation that the Federal Reserve will keep interest rates at almost zero this year. The Yen also rose against the Dollar as falling U.S. yields continued to weigh on the U.S.
