Dollar, Yen Fall as Evidence of Recovery Boosts Demand for Higher Yields
Sept. 1 (Bloomberg) -- Former Bank of Japan board member Nobuyuki Nakahara talks about the central bank's decision to expand a bank-loan program as a means of halting the yen's advance. He speaks from Tokyo with Mark Barton on Bloomberg Television's "Countdown." (Source: Bloomberg)
Aug. 31 (Bloomberg) -- Shaun Osborne, chief currency strategist at TD Securities Inc., talks about the outlook for the dollar-yen exchange rate. Osborne speaks with Deirdre Bolton on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Aug. 31 (Bloomberg) -- Thomas Harr, Singapore-based Asia foreign-exchange strategy head at Standard Chartered Plc, talks about Japan's attempts to stem gains in the yen. Bank of Japan Governor Masaaki Shirakawa and his board expanded a bank-loan program by 10 trillion yen ($118 billion) after an emergency meeting yesterday in the wake of the yen reaching a 15-year high. Harr also discusses the outlook for the Japanese and U.S. economies. He speaks with Linzie Janis on Bloomberg Television's "Global Connection." (Source: Bloomberg)
Aug. 31 (Bloomberg) -- Thio Chin Loo, a senior currency analyst at BNP Paribas SA, talks about the options available to Japanese policymakers to curb the advance of the yen. She speaks from Singapore wiith Mark Barton on Bloomberg Television's "Countdown." (Source: Bloomberg)
The dollar and yen fell against most of their major counterparts as reports showed manufacturing in the U.S. and China accelerated, spurring demand for higher- yielding assets.
The Aussie advanced to a three-week high against the greenback as Australia’s economy expanded last quarter at the fastest pace in three years. The U.S. dollar gained against the yen as the Institute for Supply Management’s measure of U.S. manufacturing unexpectedly rose for August. Earlier the dollar neared a 15-year low against the Japanese currency.
“There’s a run to riskier currencies, and the dollar is going to be on the back foot,” said Samarjit Shankar, a managing director for the foreign-exchange group in Boston at Bank of New York Mellon, the world’s largest custodial bank, with more than $20 trillion in assets under administration. “The ISM was really the catalyst because it was quite unexpected.”
The dollar declined 1 percent to $1.2809 per euro at 5 p.m. in New York after touching $1.2856, the weakest level since Aug. 19. The yen depreciated 1.3 percent to 108.15 per euro, from 106.76 yesterday. The dollar rose 0.3 percent to 84.44 yen after dropping earlier as low as 83.67 yen. It reached 83.60 yen on Aug. 24, the lowest level since June 1995.
Stocks climbed, with the Standard & Poor’s 500 Index up as much as 3.1 percent, the biggest intraday jump since July 7.
Aussie, Krone, Franc
Australia’s dollar, New Zealand’s dollar and Norway’s krone rose against all of the major currencies. The three countries traditionally benefit from global economic growth.
The Aussie gained 2.3 percent to 91.10 U.S. cents, after touching 91.14 cents, the highest level since Aug. 11. Australia’s gross domestic product expanded 1.2 percent in the second quarter after a 0.7 percent rise in the previous period, the Bureau of Statistics reported.
The New Zealand currency rose 1.9 percent to 71.20 U.S. cents, and the krone touched 6.1615 per dollar, the strongest in almost two weeks.
The Swiss franc, which reached a record high versus the euro yesterday as investors sought a haven, fell against most major currencies. It weakened 1.1 percent to 1.3011 per euro.
The ISM factory index increased to 56.3 last month from 55.5 in July, the Tempe, Arizona-based group said. Economists in a Bloomberg News survey forecast it would slip to 52.8. Readings greater than 50 signal growth. China’s Purchasing Managers’ Index rose to 51.7 in August, more than forecast, from 51.2 in July, the Federation of Logistics and Purchasing said.
Concerns Persist
Positive economic data “reduced concerns about a slowdown in global growth -- it did not eradicate them altogether,” said Joe Manimbo, a Washington-based market analyst at Travelex Global Business Payments, a currency-exchange network. “Investors still have deep-rooted concerns about the outlook for job growth, and that should ultimately benefit havens like the dollar and the yen.”
Japan’s currency gained earlier against the dollar as an ADP Employer Services report unexpectedly showed American companies cut 10,000 jobs in August. The U.S. will report on Sept. 3 that employers eliminated 100,000 jobs last month after trimming 131,000 in July, a Bloomberg survey forecast.
The U.S. economy grew at a 1.6 percent annual rate in the second quarter, a Commerce Department report showed on Aug. 27. It expanded at a 3.7 percent pace in the first quarter.
The yen may appreciate to 81 versus the greenback as weaker-than-expected U.S. data increases the prospect that the Federal Reserve will provide more stimulus to preserve the U.S. economic recovery, according to Bank of America Merrill Lynch.
‘Quantitative Easing’
“Because of weak U.S. indicators, the market will continue to expect quantitative easing to resume, which would push the dollar-yen rate down further,” Tomoko Fujii, a Tokyo-based currency strategist, wrote in a report.
The euro rallied after the People’s Daily reported Chinese Premier Wen Jiabao said China and western countries should work together to enhance the world’s confidence in the euro and the European Union economy. He made the remarks during a meeting yesterday in Beijing with Spanish Prime Minister Jose Luis Rodriguez Zapatero.
“There’s no better vote of confidence for the euro than support from China,” said Kathy Lien, director of currency research at the online currency trader GFT Forex in New York.
The Canadian dollar strengthened for the first time this week, appreciating 1.4 percent to C$1.0507 per U.S. dollar.
The currency may rally after the greenback failed yesterday to strengthen beyond an “impenetrable” level of C$1.0679, the third time since June the barrier has held, according to Royal Bank of Canada.
‘Downside Risk’
For the U.S. dollar versus the Canadian, “downside risk has increased over the short term, as yesterday’s failure to pierce key resistance at C$1.0679 hangs over the market,” George Davis, chief technical analyst for fixed-income and currency strategy in Toronto at Royal Bank’s RBC Capital Markets, wrote in a note to clients. Resistance is a level on a chart where orders may be clustered.
Peru’s sol strengthened to a two-year high versus the greenback after the U.S. factory report. The currency touched 2.7930 per dollar, its strongest level since Aug. 8, 2008, before trading at 2.7955.
To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net
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