The dollar is extending its gains against its major competitors on Thursday, adding to the strength of the previous trading day. Yesterday’s gains were fueled by comments made by Federal Reserve Chairman Ben Bernanke, as he testified before Congress.
Bernanke was vague about the time line for scaling back the Fed’s $85 billion a month bond buying plan, but said he expects the program will be reduced by year’s end. However, he assured the asset purchases will be wound down gradually so as to not derail the fragile economic recovery.
“I emphasize that, because our asset purchases depend on economic and financial developments, they are by no means on a preset course,” he said.
“If the outlook for employment were to become relatively less favorable, if inflation did not appear to be moving back toward 2%, or if financial conditions — which have tightened recently — were judged to be insufficiently accommodative to allow us to attain our mandated objectives, the current pace of purchases could be maintained for longer.”
The U.S. economy is continuing to grow at a “modest to moderate” pace, the Federal Reserve reported Wednesday in its Beige Book. Manufacturing expanded and consumer spending picked up along with residential construction, according to the Fed’s collection of anecdotal findings from across its twelve districts.
Hiring held steady or increased at a measured pace in most Districts, but the Fed noted some reluctance to hire permanent or full-time workers.
After reporting a notable increase in first-time claims for U.S. unemployment benefits in the previous week, the Labor Department released a report on Thursday showing that initial jobless claims pulled back by more than expected in the week ended July 13th.
The report said initial jobless claim fell to 334,000, a decrease of 24,000 from the previous week’s revised figure of 358,000. Economists had been expecting jobless claims to dip to 345,000 from the 360,000 originally reported for the previous week.
Philadelphia-area manufacturers reported increased business activity in the month of July, according to a report released by the Federal Reserve Bank of Philadelphia on Thursday, with the index of regional manufacturing activity reaching a two-year high.
The Philly Fed said its diffusion index of current activity surged up to 19.8 in July from 12.5 in June, with a positive reading indicating an increase in regional manufacturing activity. The increase came as a surprise to economists, who had expected the index to drop to a reading of 9.0.
With leading U.S. economic indicators turning in a mixed performance in June, the Conference Board released a report on Thursday showing that its leading economic index came in unchanged for the month.
The Conference Board said its leading economic index was flat in June after edging up by 0.2 percent in May and jumping by 0.8 percent in April. Economists had expected the index to rise by 0.3 percent.
The European Central Bank’s monetary policy will remain expansionary for as long as needed, ECB Executive Board member Joerg Asmussen said Thursday.
“Our monetary policy is expansionary and will stay like this as long as needed,” he was quoted as saying during a speech at Vilnius University in Lithuania. “We have made this clear,” he added. The ECB could introduce several measures if needed to ensure price stability, Asmussen said.
International Monetary Fund Managing Director Christine Lagarde reportedly said Thursday that the European Central Bank has more tools at its disposal, if needed, to deal with Eurozone’s economic woes.
Spanish banks’ non-performing loans increased further in May and reached close to last year’s record high, signaling that the problems facing the recession-stricken economy are worsening.
A statement released by the Bank of Spain Thursday showed that doubtful debts held by financial institutions increased to EUR170.23 billion or 1.21 percent of the total loan. The bad loan ratio has reached near the record high of 11.23 percent seen in November last year.
The dollar has climbed to a high of $1.3069 against the Euro on Thursday, from yesterday’s low of $1.3177.
Eurozone’s current account surplus decreased in May from the previous month, due mainly to higher deficit in current transfers and a decline in revenues, the European Central Bank said Friday. The seasonally adjusted current account surplus dropped to EUR19.6 billion in May from an upwardly revised EUR23.8 billion in April. In March, the balance was a surplus of EUR23.1 billion.
The International Monetary Fund on Wednesday highlighted the importance of restoring growth and rebalancing the U.K. economy to improve income and ensure debt sustainability.
Concluding an annual assessment, the Executive Board of IMF said economic recovery in the UK continues to be slow and fragile.
Directors welcomed progress in reducing fiscal risks and ensuring the sustainability of public debt. But a number of other Directors noted that slow growth could undermine the credibility of the adjustment effort and called for additional flexibility.
Although the lender welcomed the accommodative stance of monetary policy, many directors were skeptical about the effectiveness of additional policy easing.
The greenback reached a low of $1.5241 against the pound sterling on Thursday, but has since risen back to around $1.5200.
U.K. retail sales grew for a second consecutive month, led by higher department store sales in the wake of robust consumer spending, adding to signs of a consumer-led recovery. Retail sales volume, both excluding and including auto fuel, grew 0.2 percent each in June from May, data from the Office for National Statistics showed Thursday.
Nonetheless, growth in sales volume including auto fuel was slower-than the expected 0.3 percent and below the 2.1 percent rise seen in May. Excluding auto fuel, sales grew in line with economists’ expectations, after expanding 2.1 percent a month ago.
The buck has climbed to over a 1-week high of Y100.644 against the Japanese Yen on Thursday, from Tuesday’s low of Y98.881.
Japanese corporate loan demand dropped in the second quarter as firms reduced their fixed investment, while demand from households improved, the latest Senior Loan Officer Opinion Survey from Bank of Japan showed Thursday. The balance of demand for loans from firms fell to -2 from 5 in the previous survey period. The index is forecast to rise to 3 in the third quarter.