Sterling stronger; dollar rally fails

Sterling stronger; dollar rally fails

Story link: Sterling stronger; dollar rally fails

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The US dollar tried to stage a rally on Thursday after the US Treasury declined to label China as a “currency manipulator” in its semi-annual foreign exchange report and after the Federal Reserve raised the interest rates another 25 basis points to 5 percent, but the rally fizzled out after new data on retail sales in the US showed a gain of only 0.5 percent in April overall, and an even lower 0.1 percent rise when gasoline sales were taken out of the equation.

After an initial gain of 0.9 percent in relation to the euro and the Japanese yen, by mid-afternoon in New York the greenback had lost 0.1 percent to the yen, to ¥110.47. In addition, the euro had recovered to gain 0.2 percent versus the dollar to $1.2823.

The euro benefited from better than expected economic growth in the Eurozone. The economy in the Eurozone expanded by 0.6 percent in the first quarter of the year. Additionally, analysts said that predictions for the growth of the gross domestic product in the region would likely be revised upward, a move that would probably induce the European Central Bank to increase interest rates to 3.5 percent by the end of the year.

Sterling was stronger on the day, based on new data that showed industrial and manufacturing output in the UK each up by 0.7 percent month-on-month in March, much better than the 0.2 percent increases that had been expected. The UK currency added 0.9 percent in relation to the US dollar, to $1.8794. Sterling was up 0.7 percent to ¥207.61 versus the yen, gained 0.6 percent to £0.6823 in relation to the euro, and added 0.5 percent to SFr2.2836 against the Swiss franc.

In the Middle East, Kuwait revalued the dinar up 1 percent to KD0.2891 to the dollar. Analyst opinion was that the increase, the first in almost a year and a half, would probably force other oil exporting nations, such as Saudi Arabia, to do the same.