The US dollar was a touch firmer and near two-week peaks against the yen in still subdued holiday trade. Major markets in Europe remained closed for the long Easter holiday weekend. The yen declined after figures showed Japan posted a larger-than-expected monthly trade gap of ¥1.45 trillion in March (€10.2 billion). Imports were up a solid 18.1 per cent but exports, the lifeblood of the Japanese economy, slowed to an increase of just 1.8 per cent. Signs of tepid global demand for Japanese exports added to the headwinds on the economy stemming for a higher sales tax that went into effect earlier this month. Currencies for the most part struggled for direction with a sizable portion of the market still on holiday. Lighter trading conditions kept the dollar and major currencies confined to slender ranges. Dollar sentiment has shown signs of brightening, following a run of positive recent data on jobs and inflation, but meaningful upside scope for the dollar has been held in check by the uncertain outlook for when the Federal Reserve might raise interest rates.
Euro
A little changed single currency held in the low $1.38s against the greenback, the middle of recent ranges. Uncertainty over the outlooks for monetary policy on either side of the Atlantic has offered little fodder for euro-dollar. The euro has struggled after the European Central Bank recently warned of action to keep a strong currency from exerting further downward pressure on already dangerously low inflation. Many expect the Fed to hike interest rates next year, but uncertainty over the timing has hindered upside momentum for the dollar. Driving the euro this week will be reports on manufacturing and data on Germany’s all-important Ifo survey of business optimism.
Sterling
The pound held close to last week’s four-and-a-half year high against the greenback. The UK currency is back to outmuscling its rivals after data last week showed British unemployment at 6.9 per cent, the lowest in five years which strengthened the case for a local raise rise next year. The pound has enjoyed solid underpinning on the notion that Britain may raise rates before its counterparts in the US and eurozone. But somewhat clouding the outlook for higher rates in Britain has been the recent trend lower in UK inflation.
US dollar
The dollar was steady to firmer in holiday-leaned trade. US bond yields kept towards the upper end of recent ranges, supporting the dollar. Investors this week will eye used and new home sales, durable goods and a report on consumer sentiment from the University of Michigan. What the data suggest about the health of the world’s biggest economy and when the Fed might raise rates should help drive the dollar.