US Dollar Falls For The Week
Posted on 12. Sep, 2009 by Founder in Blog
The US dollar ended Friday on mixed note, as a more than 1 percent decline against the Japanese yen generally put the currency under pressure versus the rest of the majors. US economic news was generally better-than-expected, as the University of Michigan’s preliminary reading of consumer confidence jumped to a 3-month high of 70.2 in September from 65.7 in August.
A breakdown shows improvements in sentiment on both current economic conditions and the economic outlook, which differs greatly from the previous month, when the current conditions component dove to a 5-month low. That said, the final reading of the survey isn’t due out until September 25, and it is highly prone to revisions. Meanwhile, wholesale sales rose for the third straight month in July at a rate of 0.5 percent, and combined with a 1.4 percent drop in inventories, the inventory/sales ratio slipped to 1.23, the lowest since October 2008, from 1.25.
Overall, this indicates that rising domestic demand is helping to eliminate the excess supplies piled up in wholesaler stock rooms. On the inflation front, the US import price index rose 2 percent in August, which brought the annual rate up to -15.0 percent from a record low of -19.2 percent, and suggests that next week’s release of the US consumer price index (CPI) could show similar buoyancy.
In addition to CPI, the US dollar will face big event risk on Tuesday as the Commerce Department is forecasted to report that US retail sales jumped 1.8 percent in August, which would mark the biggest monthly rise since January 2006, led by increased auto and gas station sales. Indeed, as the deadline for the “cash for clunkers” program neared on August 24, eligible buyers likely rushed to take advantage of the deal.
Furthermore, this index is not adjusted for inflation, so the steady rise in average gasoline prices during the month should contribute to overall gains. That said, excluding items like autos and gas, advance retail sales are projected to edge only 0.1 percent higher, following 5 consecutive months of contraction, but there may be even greater upside potential due to “back to school” shopping.
Measures of consumption could start to deteriorate once again in September, though, as the impact of the “cash for clunkers” program fades and as unemployment continues its steady ascent. Nevertheless, if the August reading of US advance retail sales reflects strong results, the US dollar could rally in response.
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