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Dollar Falls on European Debt Concerns, Disappointing Data
Sep 19,2011 08:58CST
industry news
The U.S. dollar fell against major currencies in late New York trading this week as investors' concerns about the European debt crisis deepened and U.S. economic data came in disappointing.

NEW YORK, Sept. 16 (Xinhua) -- The U.S. dollar fell against major currencies in late New York trading this week as investors' concerns about the European debt crisis deepened and U.S. economic data came in disappointing.

The European Central Bank (ECB) said it would provide more liquidity to European banks, along with other central banks, including the Federal Reserve and Bank of Japan, in an effort to supplement banks' liquidity.

The move came amid broad fear about the health of European banks and debt crisis. The euro was boosted immediately after the news, but fell back as investors realized the actions by the central banks might not resolve the deepening problems completely.

On Tuesday, political leaders of Greece, Germany and France held a conference call to discuss the debt problems in Greece. It is widely believed that Greece might not reach its austerity goal this year as economic recession was deeper than previous estimates.

The result of the conference, however, came out positive as European leaders pledged to stick to previous bailout plans to rescue Greece and Greece agreed to abide by its austerity plan.

Investors kept a close watch on the meeting of Eurozone finance ministers, in which the U.S. Treasury Secretary Timothy Geithner also participated.

Geithner urged his european counterparts and the ECB to work together in solving the debt crisis and to enhance the power of the region's rescue fund, amid signs showing officials have yet to overcome divisions over how to proceed.

The euro managed to rise nearly 1 percent against the dollar this week, trading at 1.38 dollars per euro.

Meanwhile, U.S. economic data came in disappointed this week, hurting investors' faith in the greenback. The U.S. Labor Department said U.S. import prices fell in August, thanks to lower fuel, food and industrial material costs.

A separate report by the Labor Department showed that initial jobless claims rose 11,000 to 428,000 last week, the highest level in nearly two months, suggesting the job markets were still weak.

The government agency also said the Consumer Price Index rose a seasonally adjusted 0.4 percent in August while the core rate rose 0.2 percent, larger than previous expectations by economists. The figure showed the inflationary risk is emerging.

The Federal Reserve Bank of Philadelphia's general business conditions index improved to -17.5 from August's severely negative reading of -30.7, suggesting the business conditions in the Mid-Atlantic region are still contracting.

A report form the Federal Reserve said that overall industrial production in August rose 0.2 percent, following a 0.9 percent fall in July, showing the recovery of industrial production might decelerate.

The poor economic data weighed on the dollar as the dollar index fell 1.3 percent this week.

Investors in currency markets looked forward to the Federal Reserve's monthly monetary policy meeting next week. It is expected that the Fed might launch a new round of quantitative easing to support the economy if the situation required.

However, the opinions of Fed policy makers were divided and added to the uncertainty of the Fed's monetary policy. Two Fed regional reserve presidents argued this week that further easing was not necessary, given the current circumstances.



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