By Josie Cox
The U.S. dollar slumped to a more than two-week low against the
euro early Friday, pressured by some weak U.S. housing markets
numbers out Thursday, and fears that any more downbeat data could
knock investors' confidence in a Federal Reserve interest rate rise
later this year.
In early European trade, the euro rose to $1.09, its highest
level against the greenback since early April, while the British
pound hit a level against the dollar last seen in early March.
Later in the session the euro reversed marginally, but remained
elevated against the buck.
U.S. new-home sales in March and a preliminary reading of
April's factory activity missed economists' expectations on
Thursday. On Friday, data showed that orders for durable U.S. goods
jumped a seasonally adjusted 4% in March, but the increase was
driven almost entirely by higher demand for autos, commercial jets
and military hardware.
A key measure of business investment, meanwhile, fell for the
seventh straight month to underscore a slowdown in how much
companies are spending, sending the U.S. dollar index down 0.2% on
the day.
The dollar has had a stellar run over the past few months,
fueled by expectations that the Fed will raise rates while other
central banks around the world are still aggressively easing.
It has added more than 11% against the euro so far this year,
but a string of recent downbeat economic figures has sparked some
concerns that the dollar trade may be becoming overcrowded.
Kit Juckes, a strategists at Société Générale said that the
"consensus is still dollar-bullish" but admitted that it has become
"a little tired".
Despite the dollar weakness though, the Turkish lira slipped to
a fresh all-time low against the greenback on Friday. There was no
immediate obvious trigger for the move, but Piotr Matys, a currency
strategist at Rabobank, said that it could raise pressure on the
government to approve a central bank emergency interest rate
rise.
Elsewhere on Friday, European shares climbed, but gains were
limited as fears over the future of Greece continued to linger.
By mid afternoon, and having ended the previous session lower on
downbeat economic data, the Stoxx Europe 600 rose 0.3%. Germany's
DAX added 0.5% after figures showed that business sentiment
improved in April. London's FTSE was also up 0.3%, led by HSBC
Holdings PLC, on news the bank is reviewing whether to move its
headquarters outside the U.K.
In the U.S., the S&P 500 was indicated opening 0.2% higher.
Futures, however, don't necessarily reflect moves after the opening
bell.
On Friday, Greece once again dominates the agenda as European
Union leaders are due to meet in Brussels, but the chance of the
talks yielding any major progress appears slim.
On Thursday, German Chancellor Angela Merkel met with Greek
Prime Minister Alexis Tsipras ahead of the summit of European Union
leaders in Brussels on Friday. "We had a constructive dialogue,"
Ms. Merkel said after the meeting, adding that she wants to keep
the "confidentiality" of the talks.
Asked about the perspective of Greece soon running out of money,
Ms. Merkel said: "We have to do everything to avoid that."
"By now it has become clear that we should not expect too much
in terms of meaningful steps toward Greece resolving its problems,"
said ING strategist Job Veenendaal. Citigroup wrote in a note that
Greece is "running out of money, ideas, time and patience". The
current negotiations, they added, "are stuck and the risks of a
failure of these negotiations have risen further".
They said that "the bar to an agreement is gradually being
raised" and that it is now "plausible that capital controls will be
imposed in Greece or a government default takes place before an
agreement is struck or that no agreement will be reached."
Greek stock markets have had another turbulent week and the
country's main stock index, the Athex Composite, is now close to
11% lower so far this year. Over the last 12 months it has
depreciated around 40%, making it one of the world's worst
performing indexes.
Yields on Greek government bonds, which rise as the price of
bonds fall, have remained pinned close to multiyear highs this
week.
On Friday, the yield on the two-year bonds was at 24.9%, while
the yield on the 10-year was at 12.4%.
A so-called inverted curve, where longer-dated bonds yield less
than those that are due for repayment sooner, indicated that
investors are factoring in a severely heightened probability of
default, despite the easing of tensions.
Yields on German government bonds, meanwhile--commonly valued as
a low-risk asset during times of stress--remained pinned a handful
of basis points off all-time lows. The 10-year government bond was
yielding just 0.16% on Friday. The 30-year bond was around
0.58%.
Write to Josie Cox at josie.cox@wsj.com
Access Investor Kit for HSBC Holdings Plc
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=GB0005405286
Access Investor Kit for HSBC Holdings Plc
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US4042804066