Dollar Declines
Posted on: Jun 17th, 2009 | By Doug Casey | Filed under US Dollar & Forex Trading
In the currency market, the dollar slipped against the euro. Late Tuesday, the euro was trading at $1.3846 vs. $1.378 on Monday.
The buck slid after two days of strong gains, as the data released yesterday tended to suggest a potential recovery in the US economy.
First up, the Commerce Department reported that housing starts jumped 17.2% to a seasonally adjusted annual rate of 532,000, after plunging to a post-World War II low in April. That exceeded economists’ expectations for a rise only to 485,000.
It may have been a surprise to the upside, but the fact remains that, “While bottoming is an important step, there is little upside evidence in housing to suggest recovery,” wrote Stephen Gallagher, of Société Générale.
Then, the Labor Department said that producer prices rose only 0.2% in May, after seasonal adjustments. The core PPI, which excludes food and energy prices, fell 0.1%. Economists’ expectations were for the overall PPI to rise 0.5% and for the core to gain 0.1%.
Despite May’s little ray of light, the producer price index has dropped 5% in the past year, the biggest year-over-year decline since August 1949, and has ignited some deflationary fears.
All things taken into account, “With inflation concerns eased, and perhaps a nascent housing recovery in the works, risk appetite has blipped higher following the data, and has largely unwound Monday’s bout of risk aversion,” said analysts at Action Economics.
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