While you were sleeping: US dollar weakens

While you were sleeping: US dollar weakens; US home resales rise

June 3 – The U.S. dollar weakened against the euro amid suggestions the greenback’s role as the world’s reserve currency will dwindle as borrowing by the world’s biggest economy soars.

Russian President Dmitry Medvedev has proposed a supranational currency for emerging economies and may push the proposal at a meeting of the so-called BRIC economies of Russia, Brazil, India and China this month. He first raised the idea of an alternative reserve currency in March.

The Dollar Index, which tracks the greenback’s performance against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, fell 1% to 78.39, the lowest this year.

The dollar weakened to $1.4324 per euro from $1.4159 and traded at 95.64 yen from 96.59. The euro traded at 1.3698 yen, from 136.78.

U.S. Treasury Secretary Timothy Geithner, on his first visit to China since taking the job, said Chinese officials are supportive of American efforts to restore its economy and understand the need for the record budget deficits.

He told leaders in China, the biggest holder of U.S. government debt with some US$768 billion, that the U.S. is committed to keeping the dollar strong and inflation low – helping safeguard the value of China’s holdings of the debt.

U.S. pending sales of existing homes rose 6.7% in April, according to the National Association of Realtors, more than 10 times greater than expected and the biggest monthly gain in more than 7 years, stoking hopes that the U.S. housing market is stabilizing.

Shares on Wall Street gained after the housing data but pared their advance as lenders announced plans to raise more capital.

Bank of America has brought its capital raising to almost US$33 billion, including US$7 billion over the past week. That’s enough to meet the shortfall estimated by regulators in the so-called stress tests.

JPMorgan Chase sold US$5 billion of stock, Morgan Stanley sold US$2.2 billion and American Express sold US$500 million as lenders seek to repay and exit the Troubled Asset Relief Program, or TARP.

Goldman Sachs Group raised US$1.9 billion through the sale of its stake in Industrial and Commercial Bank of China.

American Express slipped 4.9% to US$24.71, leading decliners on the index, and JP Morgan Chase fell 4.5% to US$34.50. Citigroup, which will exit the Dow Jones Industrial Average, slipped 4.9% to US$3.51. Bank of America rose 1.8% to US$11.41.

Auto and home lender GMAC will make its first sale of notes guaranteed by the Federal Deposit Insurance Corp., Bloomberg reported, citing a person familiar with the plan. GMAC has already been granted approval to sell US$7.4 billion in government-backed debt to strengthen its ability to provide credit.

The Dow rose 0.2% to 8740.87, with home improvement chain Home Depot rising 1.4% to US$24.50. Aluminium producer Alcoa gained 7% to US$10.52. The Standard & Poor’s 500 rose 0.2% to 944.74 and the Nasdaq Composite rose 0.4% to 1836.80.

Ford Motor Co., the only one of the big three U.S. automakers not in bankruptcy, rose 4.6% to US$6.41.

The automakers reported a smaller-than-expected decline in sales last month. General Motors’ U.S. sales dropped 30% in May, while Chrysler’s fell 47%. Ford’s sales fell 24%. Sales by Toyota tumbled 41% and Honda’s slid 42%.

Seasonally adjusted sales fell to 9.2 million in May from 14.2 million a year earlier, according to a Bloomberg estimate, the fifth straight month of fewer than 10 million units.

GM plans to sell its Hummer brand of sport-utility vehicles to China’s Sichuan Tengzhong Heavy Industrial Machinery, Bloomberg reported, citing people familiar with the plan. GM aims to shed unprofitable brands and re-emerge as a leaner automaker with less debt after filing for bankruptcy protection this week.

Gold rose as the U.S. dollar weakened, stoking the appeal of the precious metal as an alternative investment.

Gold futures for August delivery edged up 0.2% to US$981.90 an ounce on the New York Mercantile Exchange.

Copper retreated from a seven-month high on concern the metal’s 63% surge this year was excessive given the level of demand.

Copper futures for July delivery fell 0.9% to US$2.2975 a pound on the New York Mercantile Exchange.

Crude oil for July delivery was little changed at US$68.56 a barrel in New York.

Stocks in Europe were mixed as the European Union’s statistics office reported the region’s jobless rate rose to 9.2% in April, the highest in about 10 years.

The Dow Jones Stoxx 600 Index slipped 0.03% to 214.24. Barclays Plc dropped 14% after investors in Abu Dhabi investors sold about 3.46 billion pounds of their shares in the lender.

Volkswagen jumped 10% after majority shareholder Porsche said it will fulfill its obligations to ensure financial support for the automaker and has secured 10 billion euros of a 12.5 billion-euro credit line. Porsche rose 2.7%.

The U.K.’s FTSE 100 fell 0.7% to 4477.02 while Germany’s DAX 30 edged up 0.03% to 5144.06 and France’s CAC 40 slipped 0.04% to 3378.04.

Europe’s discount airline Ryanair posted its first full-year loss in 20 years and forecast a dimmer outlook, though it expects to pick up customers as travelers trade down to cheaper fares.

(BusinessWire)