© Reuters. An employee counts US dollar banknotes at a currency exchange office in Jakarta, Indonesia, October 23, 2018. REUTERS/Beawiharta
Written by Chuck Mikolajczak
NEW YORK (Reuters) – The decline eased on Monday after a batch of economic data suggested the US economy remained resilient, while the euro strengthened after comments from European Central Bank President Christine Lagarde.
The dollar fell further after data showed an unexpected rise in new orders for US-manufactured capital goods in May, despite a downward revision of the previous month, suggesting some continued caution among companies about new capital investment.
A separate reading of consumer confidence from the Conference Board showed its index rose to 109.7 in June, the highest level since January 2022, from 102.5 the previous month.
Additional data on new single-family home sales in May and house prices in April also indicated that the housing market was able to withstand higher interest rates from the US Federal Reserve.
“The problem is that there is no indication that a recession is coming, you can’t see it in any of the stats, what you have is a historical pattern where when the Fed raises interest rates so quickly and so far you get a recession,” said Joseph Trevisani, senior analyst at FXStreet. com.
“That’s the model everyone’s looking at — models don’t always work, you know.”
The dollar index fell 0.214% to 102.490. The Japanese yen fell 0.32% against the dollar at 143.97 per dollar after falling to 144.02, its weakest level since November 10 as investors looked for possible intervention by the Bank of Japan (BOJ), which last intervened in the yen when it traded around 145 per dollar.
Morgan Stanley (NYSE:) said on Tuesday that it now expects the Fed to raise its key interest rate by 25 basis points in July, from an earlier estimate of the pause, raising its final rate forecast to 5.375%.
Earlier on Tuesday, Japan’s Finance Minister Shunichi Suzuki warned of a backlash if the currency continues to depreciate.
The Japanese currency came under pressure as the Bank of Japan maintained its soft monetary policy, while central banks around the world embarked on a rapid path of raising interest rates to combat stubbornly high inflation.
The euro rose 0.47% to $1.0955 after it climbed to $1.0976, the highest level since June 22, following comments from European Central Bank officials.
Lagarde said that inflation in the eurozone has entered a new phase that could continue for some time, and “it is unlikely that the central bank will be able in the near future to announce with complete confidence that peak rates have been reached.”
The Euro rose 0.79% against the Yen, to 157,740. The pound was last trading at $1.2745, up 0.26% on the day.
Federal Reserve Chairman Jerome Powell, Bank of England Governor Andrew Bailey and Bank of Japan Governor Kazuo Ueda are scheduled to speak in a session with Lagarde on Wednesday.
The Russian ruble fell 0.89% against the dollar at 85.17 per dollar and was on track for a fourth consecutive session of declines after touching its weakest level since March 2022 on Monday.
Russian mercenary leader Yevgeny Prigozhin arrived in Belarus under an agreement that ended a brief insurrection against the Russian army by his fighters, the official Belta news agency said, quoting Belarusian President Alexander Lukashenko.
