USD Stabilizes from G7 Declines

The dollar slumped against the majors, falling to 1.5884 versus the euro and declining closer to the 100-level against the yen. The catalyst for the latest move lower was comments from the G7 Finance Ministers meeting over the weekend.

The communiqué from the G7 Finance Ministers meeting marked a shift in its language concerning foreign exchange. The G7 expressed concern and apprehension to the “sharp movements in major currencies” and “their possible implications for economic and financial stability”. Although the G7 said it would “monitor exchange markets closely and cooperate as appropriate”, there was no evidence of intervention being discussed at the meeting.

US economic data released earlier in the session helped the greenback recover slightly, offsetting some of the gloomy sentiment from Friday’s disappointing University of Michigan consumer sentiment – which had tumbled to its lowest since 1982. Persistent fears that the economy is already in recession have raised concerns that the US consumer will scale back expenditures, thereby exacerbating the downturn. March retail sales improved by 0.2%, reversing the 0.6% decline in February. The excluding-autos reading rose by 0.1%, versus a 0.2% decline a month earlier. Business inventories were inline with expectations at 0.6%, down from 0.8% in February.