The U.S. Dollar dropped slightly after economic reports indicated that the Index which gauges consumer sentiment increased more than anticipated. Despite positive news issued by the University of Michigan showing a jump on the index from 83.9 to 85.1 in July, money market investors traded cautiously due to uncertainty over what the Federal Reserve may decide when it meets this week. The report also showed that inflation forecasts dipped from 3.3 to 3.1% in June.
The Yen rallied for the second day in a row versus the greenback after Japanese releases confirmed that consumer prices advanced the most in five years, reducing the possibility the central bank will expand the stimulus program aimed at overcoming deflation. According to official figures, core consumer price inflation in Tokyo reached an annualized 0.4% this month, while economists had predicted it would go up to 0.3%. The Yen strengthened against all of its Forex peers after Asian equities fell the most in six weeks, a factor that raised the appeal of safe havens.
And due to the demand for refuge brought on by the drop in Asian stocks, the Swiss Franc surged to its highest trading price against the U.S. Dollar since June. Once again, currency speculators saw the Franc as a safe haven. And given the uncertainty surrounding Greece’s debts, investors decided to sell off the Euro and open positions with the Swiss currency.
In other FX news, the British Pound strengthened against the Euro for the first time in close to one week as investors predicted that upcoming data out of the U.K. would show that approvals for mortgage loans increased and manufacturing activities improved in July. The Sterling extended gains versus the greenback on speculation the Bank of England will announce that financial institutions granted 59,600 loans for the purchase of homes in June, which was the most since spring of 2008. The British currency traded strongly a day after the Office for National Statistics said that the nation’s gross domestic product grew at a quicker pace in the second quarter of 2013 as it went from 0.3 to 0.6 percent in the months between April and June.
In the South Pacific, Australia’s Dollar continued to climb against its U.S. counterpart on speculation the Federal Reserve will adhere to the current level of stimulus which has helped bolster high-yield assets. The Aussie declined to a 4 1/2 –year low versus the New Zealand Dollar as Forex currency traders increased speculation the Reserve Bank of Australia would likely cut the benchmark interest rate in August.