Tuesday, November 14, 2006

Dollar Tumbled on Weak PPI

The dollar slumped across the board earlier on weak inflation and retail sales reports that raised the concern that U.S. economy is slowing down. The dollar weakened from 1.2870 against the euro and 117.25 versus the yen after the release of the weaker-than-expected U.S. data.

One of the inflation gauges, PPI, surprisingly fell at an annual rate of 1.6% in October, well below the expectation of a ¨C0.6% decline, indicating the inflation is decelerating. Excluding food and energy costs, core PPI also came in unexpectedly weak at ¨C0.9% following a 0.6% rise in the prior month. We will look to the more important inflation report, CPI report due this Thursday, for more clues on U.S. inflation outlook.

U.S. retail sales fell 0.2% in October after a downwardly revised 0.8% decline in the previous month. Excluding auto sales, core retail sales declined 0.4%, exceeding the forecast for a 0.2% fall.


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