Modest US Recovery

The dollar extended losses against major currencies after the Fed’s beige book reported modestly improving economic conditions in the US. A US Treasury report said that the US had a budget deficit of $91.8 billion for the month of December. The Fed report said that December’s retail sales were better than in 2008 but still shore to 2007 sales figures. Some Fed districts reported some increase in economic activity and an improvement in conditions.  The beige book is formally known as the Summary of Commentary on Current Economic Conditions and is published by the Federal Reserve board eight times a year. The beige book is a collection of “anecdotal information on current economic conditions” in each Fed district.

Ongoing Greek Fiscal Problems Pressure Euro

The euro declined against the dollar and yen after comments by European Central bank President Jean Claude Trichet who said that the economic outlook for the euro zone remains uncertain and suggested that the ECB’s rates would be on hole for quite some time. Greece’s fiscal problems have also weighed on the euro. German Chancellor Angela Merkel said that Greece’s budget deficits may send the euro into a “very difficult phase.” Alan Ruskin of the Royal Bank of Scotland Group Plc stated, “The euro has this overhang from Greece, which is still making headlines. There’s definitely concern around the euro periphery in general.” Referring to Greece Trichet said, “no government, no state can expect special treatment.”

Aussie Big Winner

The dollar fell vs. the yen after Commerce Department figures reported that US retail sales unexpectedly fell 0.3% in December. New York Fed Bank President William Dudley said that Fed rates are likely to remain low for at least six month and possibly for two years dimming speculation that the Fed will raise rates anytime soon. The Aussie was the biggest winner vs. the greenback after Australia’s statistics bureau said that Australian employers added 35,200 jobs in December.