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The yen fell against all its major counterparts as radiation levels that can prove fatal were detected at a damaged nuclear power plant in Japan amid signs the global economic recovery is gaining momentum elsewhere.
“Dollar-yen is all about what’s happening with this power plant right now,” said Greg Salvaggio at Tempus Consulting Inc. “The claim numbers are pretty much set and insurance companies know what they’re going to have to pay so what’s happening now is there significantly growing concern on the Japanese government’s inability to contain this situation.”
The euro erased losses against the dollar after European Central Bank President Jean-Claude Trichet said inflation rates that stick above 2% would be a concern.
“Our definition of price stability is below 2 percent, close to 2 percent,” Trichet said. “Differences must be a worry because they can become persistent.”
Trichet, told the European Parliament March 21 he has “nothing to add” to his March 3 remarks when he said policy makers may raise the benchmark rate from a record low of 1 percent at their next meeting April 7.
Markets reacted to Trichet’s “hawkish” comments, said Andrew Busch, a global currency strategist at Bank of Montreal in Chicago.
The dollar earlier advanced after Federal Reserve official James Bullard said the central bank may consider scaling back its monetary stimulus.
“The economy is looking pretty good,” Bullard told. “It is still reasonable to review QE2 in the coming meetings, especially this April meeting, and see if we want to decide to finish the program or to stop a little bit short,” he said, referring to the second round of so-called quantitative easing, due to end in June.
“If you take the Fed speak, coupled with positive data surprises, that could certainly support yields and in turn support the dollar against the yen or the euro,” said Mark McCormick, a currency strategist at Brown Brothers Harriman & Co.
Consumer spending in the U.S. rose more than forecast in February as incomes climbed, helping to bolster the expansion in the world’s largest economy. Purchases increased 0.7%, the most since October, after advancing 0.3% the prior month, Commerce Department figures showed today.
Canada’s currency was the best performer against the dollar as crude oil traded near a two-week high amid concern renewed violence in Libya may further disrupt supplies.
The franc has surged 8 percent in the past year.
“Given the nuclear situation right now, I think yen as a safe haven has disintegrated and Swiss franc as the global safe haven is a much more probable trade right now,” said Tempus’s Salvaggio.
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