Dollar loses ground on currency markets

Story link: Dollar loses ground on currency markets

The dollar lost 0.6 percent to $1.2106 in relation to the euro on Wednesday. It also fell against the yen, sterling, and the Canadian dollar, falling 0.1 percent in relation to the yen to ¥109.29, falling 0.8 percent to $1.8211 against sterling, and losing a full 1 percent to $1.2392 against the Canadian dollar.

Sterling was stronger, going up 0.2 percent to £0.6644 in relation to the euro, a 10-month high and gaining 0.7 percent in relation to the yen to ¥198.93.

The Norwegian krone was 0.3 percent weaker in relation to the euro at NKr7.8816 after the Norwegian prime minister said that the krone’s two-year high in relation to the euro was “worrying”.

The dollar’s trouble was due to negative net inflow data. The net inflow in April was $47.4 billion, not enough to cover the US trade deficit. This was true despite strong buying of US Treasury bonds by central banks around the world. This includes purchases of $6.9 billion by China, $5.7 billion by Japan, and $12.9 billion by Norway.

But, while purchases of government bonds by other governments were up, there was not much demand for US bonds and equities from the private sector.

Investors, however, tended to ignore these figures, saying that the demand for dollars is stronger now than in April, the period the newly released data covers.