The US dollar and Japanese yen rose after government reports showed US retail sales and producer prices unexpectedly fell in March. The weak data increased risk aversion and concerns over a US economic recovery. The Dow fell 138 points to 7920. The euro was pressured by European Central Bank council member Athanasios Orphanides' comment that deflation risks in the EMU may require further ECB policy easing beyond next month.
Sterling rose on optimism that the UK housing slump will end, and falling LIBOR rates indicate UK and other global banks are on a recovery. The Australian dollar consolidated earlier gains as copper prices plunged. The Canadian dollar rose to the highest level in over ten weeks.
The USD/JPY fell sharply today, pressured by decreasing risk appetite as equity and commodity prices declined. The pair is testing support in the 98.50 area. If the support is broken, the pair may fall to the 97 area. Still, the trend is up.
We believe the USD/JPY will rise as the Japanese economy deteriorates further and Japanese investors look for higher returns abroad.
By Hans Nilsson, Capital Market Services, L.L.C.
