The dollar
fell against the yen and the euro as reports showed U.S. industrial
production dropped in April more than twice as much as forecast and New
York manufacturing unexpectedly contracted this month.
The currency has traded in a range of $1.53 to $1.56 per euro this
month as Federal Reserve policy makers cited the risk of inflation
while the U.S. economy showed signs of weakness. Canada's dollar rose
to near the strongest level versus the greenback since March as crude
oil prices surged.
``The market has focused on inflation for the past couple of weeks, and
now the data is reintroducing the idea that the U.S. economy is on a
softer footing,'' said Mike Moran, senior currency strategist at
Standard Chartered Bank in New York. ``The dollar has had ample
opportunity to build on the rebound, but it has struggled to make any
kind of headway.''
Consumer prices rose 3.9 percent in April from a year earlier, compared
with an average rate of 2.7 percent over the past decade, a Commerce
Department report showed yesterday. Cleveland Fed President Sandra
Pianalto said on May 13 that prices are rising ``somewhat faster than I
would prefer.''
The dollar weakened versus the yen and the euro as the Fed reported a
0.7 percent decrease in production at U.S. factories, mines and
utilities last month, following a revised 0.2 percent gain in March.
The New York Fed's general economic index, a gauge of manufacturing,
declined to minus 3.2 in May, from 0.6 the prior month. Readings below
zero signal contraction.
The U.S. currency pared its loss against the euro as the Philadelphia
Fed reported its index of manufacturing registered at minus 15.6 in
May, compared with minus 19 forecast by economists. A negative number
indicates contraction.
``The economy is stagnant,'' said Brian Dolan, chief currency
strategist at FOREX.com, a unit of online currency trading firm Gain
Capital in Bedminster, New Jersey. ``The market is pricing in some form
of rate hikes later this year. They have to be eventually priced out.
The dollar will stay on the soft side.''
The euro strengthened earlier as a report showed Europe's economy grew
more than forecast in the first quarter, increasing the likelihood the
European Central Bank will hold interest rates at a six-year high.