Nov 26, 2009
The dollar fell across the board on Wednesday as U.S. consumer spending and new home sales improved significantly, and the Federal Reserve was not overly concerned about the dollar's depreciation.
Trade volume was thin ahead of the Thanksgiving holiday, which exaggerated movements of currencies.
U.S. consumer spending rose 0.7 percent in October, according to the Commerce Department. Real consumer spending after inflation increased 0.4 percent, partly reversing September's 0.7 percent decline.
The news on income remains poor, though. Although overall personal income did rise 0.2 percent, wages and salaries were flat as the labor market continues to deteriorate. Excluding transfer payments, and allowing for inflation, personal income was down slightly in real terms.
The Commerce Department also reported that new home sales jumped 6.2 percent in October to a seasonally adjusted annualized rate of 430,000 units.
The number of unsold new homes fell for the 30th consecutive month to its lowest level since May 1971. The inventory yardstick, the months' supply of new homes at current sales rates, fell from 7.4 to 6.7 months.
The Labor Department reported that initial claims for jobless benefits fell 35,000 to 466,000 last week, a 14-month low. The four-week average of jobless claims fell to the lowest level since November 2008.
The decline of initial claims is a genuine improvement and not the result of one-time seasonal distortions, said analysts of Nomura Economics Research. It was expected that consensus forecasts for non-farm payrolls will shift higher.
The Fed released minutes on Tuesday for its latest monetary policy meeting held earlier in November. The minutes showed that Fed policymakers expect the economy to expand at a slow rate while unemployment remains high.
Fed officials thought the recent fall in the foreign exchange value of the dollar had been orderly. The central bank is expected to keep benchmark rates at ultra-low levels for an extended period.
The euro bought 1.5139 dollars in late New York trading compared with 1.4975 dollars it bought late Tuesday. The pound rose to 1.6716 dollars from 1.6593 dollars.
The dollar fell to 1.0457 Canadian dollars from 1.0577 Canadian dollars, and fell to 0.9986 Swiss francs from 1.0082 Swiss francs. It fell to 87.40 Japanese yen from 88.56 Japanese yen.