The dollar is extending its recent losses against the Euro on Friday, following the better than expected German confidence report for November. However, the U.S. currency is little changed against its other major competitors at the end of the trading week.
Atlanta Fed President Dennis Lockhart kept up his dovish tone on Friday, telling CNBC that the central bank will remain accommodative “for years.”
“The mix of tools we can use will change, and that’s where the decision on tapering comes in,” Lockhart said, referring to expectations that the Fed will wind down its $85 billion per month quantitative easing program early in 2014.
He addressed concerns about the Fed’s balance sheet, which has ballooned to near $4 trillion in an effort to keep real interest rates low by buying federal bonds.
“At the moment, I don’t think we’re in the danger zone. I think it’s manageable. The exit will be manageable when the time comes,” he said.
European Central Bank Governing Council member Ewald Nowotny said on Friday that there is no risk of deflation in the euro area. “What we see is that inflation perspectives are well anchored,” Nowotny said on the sidelines of a conference in Paris.
“So we have low inflation but we do not have deflation,” he said. “I do not see a perspective of deflation.”
The dollar has extended its recent weakness against the Euro on Friday, falling to a low of $1.3538 from Thursday’s high of $1.3398.
German business morale rebounded strongly in November to reach its highest level in more than one-and-a-half years, suggesting that the economy might have gathered momentum in the final quarter of the year.
The headline business climate index rose to 109.3 in November from 107.4 in October, survey results from the Munich-based Ifo Institute showed on Friday. Economists had forecast an increase in the index to 107.7. German economic growth moderated in the third quarter as estimated in the preliminary report, final data from the Federal Statistical Office revealed Friday.
The seasonally and calendar-adjusted gross domestic product increased 0.3 percent quarter-on-quarter in the third quarter, matching the preliminary estimate published earlier this month. This was much weaker than a 0.7 percent growth recorded in the second quarter.
The greenback is hovering around the $1.6200 level against the pound sterling on Friday, following yesterday’s sharp decline from an early high of $1.6071.
Bank of Japan Governor Haruhiko Kuroda said Friday that he does not see the current weakness in yen as excessive. He also noted that the central bank is closely monitoring the evolution of asset prices in the country.
The exchange rate is still in a correction mode, reversing the record gains posted in the past year, Kuroda told lawmakers in Parliament. He said the yen is not too weak and there is no bubble-like situation.
Kuroda also assured markets that there is no danger of a bubble in the asset markets. He reiterated that the central bank is ready to adjust policy, if necessary.
The buck is currently hovering around the Y101.200 level against the Japanese Yen on Friday, following Thursday’s sharp increase from the Y100.000 level.